May 8, 2009

Mortgage Reform

Yesterday the House considered H.R. 1728: Mortgage Reform and Anti-Predatory Lending Act. This measure puts an end to many of the practices that contributed to the rise in foreclosures. It requires lenders to actually certify that a potential borrower can repay the loan they are seeking. Stunningly, this obvious step was not always taken, resulting in loans that were made without income documentation and mortgages given in excess of some borrowers' ability to repay. The bill eliminates financial incentives that enabled some lenders to make profits by placing people in costlier mortgages than they could afford.

We have also seen an explosion of home loans that were sold, resold, sliced into pieces and sold again, making it almost impossible to determine who is responsible for making sure that the loan is still sound. H.R. 1728 brings accountability to this secondary mortgage market.

H.R. 1728 includes a number of consumer protections, from prohibiting excessive fees for loan modifications and late payments, to requiring that lenders tell borrowers more about the terms of their loan, such as the most someone would pay with a variable rate mortgage. The bill recognizes that renters are also at risk as a result of the housing crisis. It protects tenants if the home they are renting is subject to foreclosure, giving them up to 90 days to relocate if the unit is their primary residence. I have been advocating for this tenant protection for some time and am pleased that this piece of the housing puzzle was included in the package.

I voted YES. H.R. 1728 passed and the entire vote is recorded below:

Financial Fraud Enforcement

This week the House also passed S. 386: Fraud Enforcement and Recovery Act. This legislation provides the Justice Department with additional tools to combat fraud related to the Troubled Asset Relief Program (TARP) and recovery funds. It updates the federal fraud statute to include TARP, recovery funds and mortgage-lending businesses. It provides additional funds for the FBI and other agencies to investigate mortgage and financial fraud.

It also establishes a Financial Markets Inquiry Commission which will study all of the issues leading up the current economic crisis in an effort to better understand how we got where we are today. Ten independent experts will be appointed to the Commission, which will be required to issue a report to Congress by December 15, 2010. I voted YES. S. 386 passed in the House and the entire vote is recorded below:

Hedge Funds

This week the House Committee on Financial Services held a hearing on hedge funds which included a discussion about H.R. 711: The Hedge Fund Advisor Registration Act, a bill I filed with Rep. Mike Castle (R-DE). The bill would close a loophole created in the Investment Advisors Act of 1940, which exempts hedge fund managers from registering with the Securities and Exchange Commission (SEC) if they have fewer than 15 clients. Our bill requires all hedge fund managers to register with the SEC so that their actions on behalf of investors are transparent.

I have long advocated this simple step as a way to better understand how hedge fund managers are operating, and how they are investing the resources of their clients. The hearing focused on identifying ways to provide simple and balanced hedge fund transparency. This type of regulation is not about the 95% who do the right thing; it's about being able to watch out for the 5% who might cross the line.

What's Up Next

Next week the House is expected to consider several bills, including the Fiscal Year 2009 War Supplemental Appropriations Bill.