Senate Democrats Propose New Restrictions on Mortgage Lenders

Inman News (12/13/07)Sen. Chris Dodd, D-Conn., on Dec. 12 introduced the Homeownership Preservation and Protection Act of 2007—which would ban prepayment penalties and yield spread premiums, require mortgage lenders to only make loans that borrowers are able to repay and force loan servicers to implement loss mitigation strategies before initiating foreclosures on homes. Mortgage Bankers Association Chairman Kieran Quinn said the bill's provisions "concern us deeply" because they would also require mortgage lenders and brokers to make loans in the best interest of borrowers as well as expose investors in mortgage-backed securities to lawsuits by individual borrowers. Quinn also noted that the bill does not establish uniform national standards that preempt state laws—something that MBA supports. Nonetheless, the bill "is an important development, as it will jumpstart the debate in the Senate over how to prevent a reoccurrence of the current troubles facing the mortgage market," he said.