Senate Banking Committee Chairman Christopher Dodd introduced legislation today aimed at providing mortgage borrowers with more protection against high-cost loans and predatory lenders.
Among other things, the long awaited legislation will allow mortgage fraud victims to sue mortgage lenders, mortgage brokers, and investors for losses they realize due to failed loans, Dodd’s office said in a statement.
“Foreclosures are at record levels in our country, hurting homeowners and weakening our economy,” Dodd said in prepared remarks. “My bill will help protect present and future homeowners from the plague of predatory lending.”
The legislation, if passed, would also hold lenders responsible for flawed loans and hold appraisers accountable for improperly inflating property values.
Similar to bill HR3915, Dodd’s bill would ban yield spread premium for subprime loans and other “nontraditional” loans that allow borrowers to defer payments, such as option arm loans, and would require lenders to determine if a borrower can pay back the loan.
And borrowers who feel those standards have been violated would be able to sue for up to $5,000, and owners of mortgage-backed securities would be required to take back or modify a loan in violation.
Republicans have been opposed to changes in current regulations which they feel could further aggravate the mortgage crisis by limiting lending to those who need it most.
Dodd’s bill will likely not be taken up by lawmakers until they return to Washington after the holidays.