Sen. Dodd proposes mortgage reform bill

Senator Dodd put forward this desperately needed legislation. It'll be very interesting to see how it's received:

Via Yahoo News - By Patrick Rucker Wed Sep 5, 4:27 PM ET

WASHINGTON (Reuters) - The chairman of the Senate Banking Committee unveiled legislation on Wednesday that would prohibit mortgage brokers and lenders from steering borrowers to high-cost loans.

The reform measure is meant to curb some of the excesses of the recent housing boom, which has caused a spike of loan delinquencies and foreclosures, according to Sen. Christopher Dodd, a Connecticut Democrat.

The legislation "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," Dodd, a contender for the Democratic nomination for the presidential election in November 2008, said in a statement.

In recent weeks, financial markets have been rocked by fears that weakness in the home lending sector will spread to other parts of the economy.

On Wednesday, leaders of the home building industry met with senior officials at the Federal Reserve to discuss the crisis. In mid-August, the Fed made an emergency cut to its discount lending rate to calm markets fearful that credit standards were tightening.

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The plan would create new standards for mortgage servicers by eliminating some of the costs and fees they impose for tardy payments. Mortgage servicers are often hired by the lender to make collections on a loan.

The legislation would also put a greater number of costly loans under regulations of the Homeownership and Equity Protection Act, which protects borrowers from predatory lenders. Dodd has previously chastised banking regulators for being unwilling to fully enforce HOEPA as many unsafe subprime loans were being offered.

Dodd's legislation would hold lenders responsible when home appraisers give a faulty value of the property or when mortgage brokers push borrowers into costly loans.

Several consumer and community groups on Wednesday endorsed Dodd's legislation as a good step to protect borrowers who are due to see their payments climb as the early, teaser interest rates expire.

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Read the entire article at Yahoo News