| WASHINGTON, April 23
WASHINGTON, April 23 Legislation meant to
protect homeowners from costly loans would ban bad practices
that have already burned out during the present housing bust
and so the plan would do little to restore the housing market,
mortgage industry leaders told lawmakers on Thursday.
Wall Street titans like Lehman Brothers and Bear Stearns
have been laid low by their bad mortgage bets and home values
have seen double-digit declines since the mortgage overhaul
legislation began moving through Congress two years ago.
Some of the worst excesses of the housing market have
self-corrected since then and tough, new lending rules would
only raise costs for prospective homebuyers, several witnesses
told a U.S. House of Representatives panel.
"If regulatory solutions are not well conceived, they risk
exacerbating a credit crisis that trillions of public dollars
have still not resolved," David Kittle, chairman of the
Mortgage Bankers Association told the House Financial Services
The costs of failing mortgages would be spread more evenly
among investors, and brokers would be prohibited from steering
borrowers toward costly loans under two provisions of the
Rep. Brad Miller, a co-author of the bill, beseeched his
colleagues not to let the mortgage industry dissuade them from
passing the kind of tough legislation that might have helped
avert the current economic collapse if it had been in place
"It's hard to argue in favor of sloppy, careless
legislation but the nation and the world would have been better
off if Congress had passed a bill that we drafted on a napkin,"
said the North Carolina Democrat who has been advocating for
mortgage reform since he was elected to Congress in 2002.
NEEDED REFORM TOO LATE
Easy-to-get subprime loans helped fuel the five-year
housing boom that ended in 2006 with home values shrinking,
inventories swelling and a record number of families facing
In the aftermath of that housing bust, regulators and
lawmakers have questioned the financing system that let so many
risky borrowers buy a home.
"Too many homeowners and communities are suffering today
because of lax underwriting standards and other unfair or
deceptive practices that resulted in unsustainable loans," said
Sandra Braunstein, the Federal Reserve Board's Director of
Consumer and Community Affairs.
In the time that Congress has been debating the question of
mortgage reform, bank regulators have taken matters into their
Lenders may not offer loans to borrowers who cannot provide
proof of income and must collect annual costs like insurance
and taxes in a borrower's monthly payments under mortgage rules
set by the Fed in July.
The legislation under debate, though, would create even
more consumer protections and ensure that borrowers receive a
"benefit" from a home loan.
Nettlesome questions such as how to measure the benefit to
a borrower have stalled the legislation that was supposed to
have been voted on early this month.
(Editing by James Dalgleish)