Federal Predetory Lending Legislation Moving To Front Burner
September 11th, 2007 categories: Buying San Diego Real Estate, Legislative, San Diego Mortgage Banks and Loans Info, San Diego Real Estate, San Diego Real Estate News
Congress is right smack in the middle of a huge quagmire. There are factions of congress that are proposing legislation that goes beyond the lenders practices they want to clean up.
In particular there is legislation being discussed that wants to reach down to the investor level that buy the mortgage securities. One such proposal has the mortgage securities and the investors that buy them to be held liable for any loan fraud involved in the securities that the packaged loans for investment contain.
The fear in any such bill is that if mortgage securities and the investors have to review each of the loans, it could spell disaster and be a sword whose edge cuts negatively on both edges.
Cutting from the one edge, the restructuring of the loan industry would get even tougher and inadvertently create situations that might resemble the very predatory lending practices that the legislatures want to clean up.
The other edge of the sword would cur even more dramatically and forcibly demonstate that if the mortgage backed bonds and the investors would face unlimited liability, the mortgage loan funding would simply dry up.
The question now is not if legislation will have these kinds of provisions, but more importantly would they pass both houses and if passed, would the President veto these bills? What about the next president?
If this legislation were to actually prevail, might it give a whole new meaning to the expression of throwing out the baby with the bath water? Stay tuned.
