Dodd Introduces Legislation to Crack Down on Predatory Lending

Press Release from the Dodd Senate staff:

Senator Chris Dodd (D-CT), Chairman of the Senate Committee on Banking, Housing, and Urban Affairs, today announced his intention to introduce legislation to reform mortgage lending practices that have created problems for homeowners and investors in the subprime market.

“Let me be clear: affordable home loans are a good thing; predatory lending is not. Predatory lending needs to be stopped, which is why I intend to introduce legislation that will put an end to the practices that have forced thousands of Americans into foreclosure and put thousands more in danger of losing their homes,” said Dodd. “My bill will end prepayment penalties – which only exist in the subprime market, and which penalize homeowners for trying to do the right thing by refinancing their mortgage. It will prohibit brokers and lenders from “steering” homebuyers to a more costly loan. And it will make brokers responsible to the people who pay them – and ban them from acting as free agents who play lenders and borrowers off against each other. Most importantly, my bill will help keep Americans in their homes while also helping to restore public confidence in our mortgage and capital markets

For the interested, here is a summary of the legislation (click through to see the complete summary):

I. Expand the Homeownership and Equity Protection Act (HOEPA) to cover more loans

II. Expand the Protections for HOEPA (“high cost”) Loans

III. Improve Protections for All Borrowers, not just subprime borrowers

IV. Create a new set of protections for subprime loans that do not meet the HOEPA threshold, but are more costly than prime loans

V. Require good faith and fair dealing in appraisals

VI. Require good faith and fair dealing in home loan servicing

VII. Foreclosure Prevention Counseling

VIII. Give the FDIC and OCC rulemaking authority under the unfair or deceptive acts or practices (UDAP) provision of the FTC Act

Speaking for someone who who always pays a little extra on each mortgage check, the first point makes a lot of sense. Why would we, as a society, allow the least wealthy homeowners who are the highest risk to be blocked from paying off their mortgages early while allowing the wealthiest who are the lowest risk to do so? Do we like the idea of foreclosures and falling property values?

You know what else makes a lot of sense? Not allowing lenders to steer prime-eligible homebuyers into higher risk subprime mortgages. It increases the risk both on the buyers and their neighbors (whose own properties stand to lose value if there is a flood of foreclosures in the neighborhood) – for no good reason.

In case any of the other Democratic candidates are wondering, this is what leadership looks like.

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12 responses to “Dodd Introduces Legislation to Crack Down on Predatory Lending

  1. I’m counting down. How long before someone logs on and blames the borrowers but not the lenders. Does CT allow Payday Loans? Talk about Predatory Lenging!

  2. [quote comment=”18579″]I’m counting down. How long before someone logs on and blames the borrowers but not the lenders. Does CT allow Payday Loans? Talk about Predatory Lenging![/quote]

    NY doesn’t allow them. I don’t know about CT. And you make a good point. Predatory lending goes well beyond mortgages. True reform would require changes in virtually all types of lending and credit.

  3. Laws of this sort remind me of the Garth Brooks lyric: “Long-neck bottle let go of my hand….”

  4. This is what leadership looks like…

    Only Dodd’s getting to the preventive stuff well after the accident has already happened!

    And leading Senator Dodd still hasn’t done shit to take on the credit card industry and their usurious practices.

    Doing the right thing isn’t about election year conversions, nor is it about press releases. If Dodd wants to convince me that as Senate Banking Chair he actually cares more about the little people than big corporate interests, …. well, he’s got to find more religion!

  5. disgruntled_republican

    [quote comment=”18594″]This is what leadership looks like…

    Only Dodd’s getting to the preventive stuff well after the accident has already happened!

    And leading Senator Dodd still hasn’t done shit to take on the credit card industry and their usurious practices.

    Doing the right thing isn’t about election year conversions, nor is it about press releases. If Dodd wants to convince me that as Senate Banking Chair he actually cares more about the little people than big corporate interests, …. well, he’s got to find more religion![/quote]

    OK, something is seriously not right in the world. This is the second time in as many days that I agree with you TBCT…I think I may cry.

  6. Did I miss a memo and there is another candidate who has proposedanything at all on this issue?

    Dodd’s plan would fix the underlying problem. Sure, I would like to see a plan that also included to the relief for the people currently suffering foreclosure due to subprime mortgages. But crapping on the one person who has proposed a fix so that this never happens again doesn’t seem particularly productive to me. Or are we only cheering for band-aids now and not cures?

    And this: If Dodd wants to convince me that as Senate Banking Chair he actually cares more about the little people than big corporate interests, …. well, he’s got to find more religion! is absurd. You think the big corporate interests want to see this practice ended forever? Or would they like to see a one-time fix that leaves the structurally unequal system in place?

  7. Um, Gabe where has Dodd been on consumer issues for the last 27 years?

    This latest housing bubble, fed by ridiculous mortgage practices, was pretty obvious in its making. Certainly someone as experienced as Senator Dodd saw the inevitable train-wreck, yet he did nothing until its consequences were upon us. And you want to call that leadership??

    In terms of Dodd actually standing up against big corporate interests, in actuality he isn’t. (If so, he would have hit one out of the park by tackling usury and the unscrupulous credit card companies.)

    What Dodd is doing now is simply playing the “pressure release valve” game. It’s half-measures made to cool-down people’s anger by blowing off a little steam with a hint of justice. (Think of Eliot Spitzer and his fines against the big trading houses after the tech bubble crashed….) Sure, someone in charge is playing a useful role, but don’t confuse it with heroism.

    Finally, will you quit accusing me of “crapping on somebody” every time I don’t toe the party line? It’s quite silly, and I guess the equivalent would me accusing you of “sucking up” to the CT Dem party structure at every turn.

  8. Finally, will you quit accusing me of “crapping on somebody” every time I don’t toe the party line?

    I will respond to this if you can point to one other time that I called out out for crapping on someone, otherwise it will be hard for to “quit” doing it.

  9. Sorry, I shouldn’t have put that in there. Why don’t we just stick to the political?

    And I’m not saying Dodd doesn’t deserve some credit. But he still hasn’t had his “show me the money” moment yet…

  10. Fine, but if you want to stay on topic, lets talk about subprime mortgages (I’d be happy to start a thread on usury fees and credit card companies, but then we would have to bash almost every politician of every party and we will get depressed). Right now, Dodd is introducing legislation that would prevent a crisis like this from ever taking place again. He deserves credit for that, especially over candidates who haven’t done anything about it. Plus, I think you may have forgotten to give him the “some” credit he desrves above…

  11. disgruntled_republican

    But Gabe, it is on topic. He is the Chairman of the Committee that oversees the credit card issues as well. I give Dodd credit for reacting to the problem but leadership would have been a proactive solution before it became a problem. He certainly had the ability to do so, did he not?

    Without trying to put words in TBCT’s mouth, I think part of what he is saying is that there is a much bigger problem than what this addresses. If Dodd jumps to try and fix these other problems, then the touting of his leadership would be much more warranted.

    Until then “Right now, Dodd is introducing legislation that would prevent a crisis like this from ever taking place again” is Dodd doing his job, not leading as you proclaim.

  12. Always great when someone else makes your case for you.

    Like this DailyKos diary currently on the Recommend List:
    “Beware…B of A Credit Card holders !”

    The diarist, Persiflage ends by saying,
    One thing I am sure of is that we can thank our feckless elected representatives in Congress for allowing the financial industry to screw us at will.

    Amen, brother. Amen

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