Protections for home-loan borrowers OKd

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By Jonathan Peterson, Los Angeles Times Staff Writer

The House approves restrictions on lenders that the president and the mortgage industry oppose. The measure's future in the Senate is unclear.

WASHINGTON -- Seeking to prevent a repeat of the current mortgage crisis, the House today approved a sweeping set of protections for home-loan borrowers.

The legislation, which would fill in a perceived gap in regulation, is intended to end some of the practices blamed for recent excesses in the lending and housing markets, especially the marketing of loans to people who couldn't afford them.

"This is an important and urgent and critical bill," said Rep. David Scott (D-Ga.), reflecting a growing political appetite for responding to the continuing mortgage debacle.

The bill would bar a lender from making a loan unless the borrower had a reasonable ability to repay it, would make clear that federal standards apply to all lenders, including mortgage brokers, and would require licensing and registration for brokers and bank loan officers.

The Democratic-sponsored bill was approved 291 to 127. It gained substantial Republican support, though most of the opposition also came from that party. The measure is opposed by the White House and much of the mortgage industry.

Calling the legislation "the first step toward reforms for the future," Rep. Carolyn B. Maloney (D-N.Y.) said it struck a proper balance by protecting consumers without restricting the availability of credit.

But opponents said the bill would limit the availability of credit by hobbling lenders with red tape and filling them with a fear of running afoul of regulators or getting sued by borrowers.

Rep. Ed Royce (R-Fullerton) said the bill relied too heavily on words such as "appropriate" and "ability to repay" that could be interpreted in various ways, confusing lenders and making the law difficult to enforce.

"This kind of murky language would invite litigation from every borrower who misses a payment," Royce said.

http://www.latimes.com/business/la-fi-mort...=la-home-center