HR 3915 receives anti-predatory-lending bill

HR 3915, the Mortgage Reform and Anti-Predatory Lending Act of 2007, would create a national licensing system for mortgage loan originators and require lenders to determine that borrowers have a reasonable ability to repay a loan. The bill would also create limited liability for companies that bundle mortgages for sale to Wall Street investors.
Critics say incentive payments to loan originators, such as yield spread premiums paid to mortgage brokers, encourage originators to place borrowers in high-cost, subprime loans when they might qualify for more affordable prime loans.
But mortgage brokers maintain that banning incentives such as yield spread premiums would reduce the incentive for lenders to do business in poor neighborhoods that might otherwise be underserved.
As approved Nov. 6 by the House Financial Services Committee, HR 3915 prohibited prepayment penalties on subprime loans. Prepayment penalties on other loans were to be allowed, but were to expire three months before a rate reset.
Some lenders say prepayment penalties give them certainty that they will receive loan payments for a predetermined period of time. In exchange for that certainty, they are able to offer borrowers lower interest rates. Eliminating prepayment penalties will make it harder for borrowers to refinance existing loans that carry such penalties, critics of the bill said.