Rep. Gillmor Introduces Bill to Crack Down on Predatory Lending

WASHINGTON, DC- Congressman Paul Gillmor (R-Tiffin) recently joined in the introduction of legislation which would curb unscrupulous lending practices and increase protections for homebuyers. Gillmor, a senior Congressman from Northwest Ohio , joined with two other senior Members of the Financial Services Committee, Ranking Member Spencer Bachus (R-AL), and Rep. Deborah Pryce (R-OH), in crafting the first significant overhaul of our lending laws in the 110th Congress.

"America currently enjoys the highest homeownership rate in our nation's history. Unfortunately, too many people, and far too many Ohioans, were offered mortgages that were wrong for them," Gillmor said. "Homeownership should remain the American dream, not a nightmare. For far too long, Ohio has been subjected to crooked lenders, loose underwriting standards, and high foreclosure rates. Ohioans have rightfully demanded their representatives take action to stem the wave of foreclosures and this bill answers their call."

As a senior member of the Financial Services Committee, Congressman Gillmor has been seriously concerned with the loosening of credit standards for several years. Already this year, Congress has held more than ten hearings about the turmoil in the housing market, many of which Gillmor attended or led as Ranking Member of the Financial Institutions Subcommittee. In addition, the Northwest Ohio Republican recently sponsored a bipartisan summit on Capitol Hill where he assembled most of Ohio 's Congressional delegation with housing advocates and representatives of the mortgage industry to discuss the foreclosure crisis in Ohio .

Today's legislation, The Fair Mortgage Practices Act, is the culmination of a 16-month effort to achieve a solution to concerns about unfair practices within the lending industry. The Act includes the following new or enhanced consumer protections:

Creates a national registration and licensing standard for mortgage originators to enhance accountability and professionalism within the industry;

Increases transparency in the mortgage process by simplifying disclosures for borrowers;

Encourages financial institutions to evaluate a borrower's ability to repay a mortgage loan before extending credit;

Increases support for housing counseling;

Restricts prepayment penalties on hybrid adjustable rate mortgages;

Requires that subprime mortgages have escrow accounts for taxes and insurance at the time the loan is consummated;

Strengthens enforcement against mortgage fraud schemes.

Rep. Gillmor has encouraged greater financial literacy for some time now. Included among the provisions contained in the Fair Mortgage Practices Act is $100 million dollars for housing counseling to low and moderate income borrowers, a more than doubling of the current federal budget for housing counseling.

"Congress has held many vital hearings already this year about the turmoil in our nation's housing market. It is always important to gather the facts first, but now the time has come for action. Today's bill provides the protection that American homeowners deserve and I hope the Democrat leadership moves quickly to bring this bill up for a vote on the House floor," Gillmor concluded.

Spencer Bachus, the Ranking Republican Member on the Financial Services Committee thanked Congressman Gillmor for his efforts to tackle the subprime issue. "Let me commend the bill's original cosponsors - Reps. Paul Gillmor and Deborah Pryce - for the leadership they bring to this important issue."

Since 1999, Ohio has been above the national average in delinquencies of both conventional and subprime mortgages. In January, the Mortgage Bankers Association announced that Ohio again led the nation with home foreclosures. Combined with Michigan and Indiana , the three states had 20 percent of the nation's foreclosures while only holding 9 percent of the loans nationwide.

Now, there are two schools of thought here. On the surface, I agree with Matt Naugle (the post disappeared from RightAngle), who essentially said the other day that fool and his money are soon to be parted anyway, sowhy should government interfere with that natural occurance. On the other hand, I suspect that BizzyBlog would make an excellent argument that predatory lending practices are a lapse in ethics for starters...

7/13 UPDATE: Thanks Matt for the link to that piece referred to above, which was actually on payday loans and not predatory lending. The idea contained in that post transfers pretty well though, so I don't feel too bad about the faulty memory...

There is a fascinating discussion going on in the comments section between Matt and JCard vs. Tom the BizzyBlogger. I think it boils down to a libertarian argument about government interference into our daily lives versus professional ethics enforced by government regulation. Like I've said before, I see this one both ways and really don't have a dog in this fight...