Gordon, House Vote to Protect Future Homeowners

May 7, 2009, WASHINGTON, D.C. – To date, the current economic crisis has resulted in 22,000 Tennesseans losing their homes to foreclosure.  To protect future homeowners and prevent a similar economic downturn from unfolding again, the House passed bipartisan legislation today that will hold mortgage lenders accountable if they use predatory loan practices.

“To have your home taken away is one of the hardest things to go through,” said Congressman Bart Gordon, who supported the passage of the bill.  “This legislation will not only protect homeowners, but it will also provide lenders with good standards to evaluate potential homeowners and their ability to fulfill their loan obligations.”

As of March, more than 61,000 homes were purchased in Tennessee with a subprime loan – loans made to borrowers with poor credit history or who provided only limited documentation of their income or assets.  Subprime loan holders are most likely to default and lose their homes.

The House-passed bill, the Mortgage Reform and Anti-Predatory Lending Act, would bar originators of mortgages from steering consumers to loans they cannot reasonably be expected to repay and prohibits lenders from paying mortgage brokers for getting consumers into loans with above-market interest rates.  It also requires mortgage lenders to verify that the prospective homebuyer can repay the loan by reviewing the consumers' credit history, current income, expected future income, current obligations, and other financial measures.

“Across the country, 3 million homes were foreclosed in 2008,” added Gordon.  “These subprime loans created the housing bubble that has now popped and it has affected everything – from job security and retirement savings to county and state budget shortfalls.”

The legislation imposes penalties on lenders that do not comply with the new lending standards.  If a subprime loan is made to a person whose credit history has not been thoroughly reviewed and the homeowner goes into foreclosure, the lender will be held accountable for the costs associated with the consumer losing their home, including the attorney fees.

The bill now moves to the Senate for consideration.