Bills target mortgage problems

WASHINGTON -- Congress took action on three bills last week responding to the mortgage crisis.

The House voted 300-114 for a bill aimed at curbing predatory mortgage sales practices.

Among other things, it would prohibit lenders from approving mortgages that borrowers clearly cannot afford, a response to instances where buyers with chancy credit were allowed to take out risky subprime loans. The bill also would require lenders to keep a financial stake in mortgages they handle as a way to share risk. They would need to retain at least a 5 percent interest in any mortgage they resell to investors.

Critics said the concepts were untested, and could have the unintended consequence of restricting certain types of home loans that would end up punishing legitimate home buyers. Reps. Shelley Berkley and Dina Titus, both D-Nev., voted for the bill. Rep. Dean Heller, R-Nev., did not vote.

MORE FRAUD PROTECTION

The House approved a separate bill that would give federal prosecutors more money to chase mortgage fraud.

The legislation would allocate $165 million for each of the next two years to investigate fraud. Most of the funding would go to the FBI, although the Securities and Exchange Commission also would get additional funds.

Supporters said financial fraud was a big factor in the collapse of subprime mortgages, which triggered breakdowns in banking and insurance that stretched across the globe.

The bill also would establish an independent commission to investigate the cause of the financial crisis. The bill passed 367-59. Berkley, Titus and Heller voted for it.

SENATE MORTGAGE BILL PASSES

The Senate finished work on a bill that would make it easier for homeowners to refinance to lower-cost mortgages backed by the government.

The bill would expand eligibility for the "Hope for Home-owners" program, which was intended to help homeowners switch risky mortgages to conventional 30-year loans.

Created last year with the hopes of helping 400,000 homeowners, the program is processing a handful of applications because critics say requirements are too strict.

Critics said the government would only get further entwined in the mortgage mess, risking even more taxpayer dollars, if the bill became law.

The bill passed 91-5. Sens. Harry Reid, D-Nev., and John Ensign, R-Nev., voted for it.

Contact Stephens Washington Bureau Chief Steve Tetreault at stetreault @stephensmedia.com or 202-783-1760.