WASHINGTON — Mortgage brokers, under fire for steering borrowers into high-cost home loans, are a prime target of fair-lending legislation soon to be unveiled on Capitol Hill.
One proposal takes aim at the commissions that brokers are paid when they sell mortgage loans at an interest rate higher than what the borrower could otherwise get. That measure is among an array of proposals designed to make various players in the loan process more accountable.
Congressional Democrats escalated the political debate Wednesday, calling on President Bush to appoint a czar to coordinate federal efforts to stop foreclosures.
Democrats also demanded that Fannie Mae and Freddie Mac -- the giant, federally chartered mortgage finance companies -- be authorized to buy more mortgages, a move that would provide capital to help strapped borrowers refinance.
"This is a national crisis," Senate Majority Leader Harry Reid (D-Nev.) said. The Democratic initiative, he maintained, was not an attempt to bail out speculators. Rather, "it deals with people who bought homes and want to keep their homes."
Meanwhile, bills now being prepared in the House and Senate seek to make various players in the lending industry more accountable -- including mortgage brokers, the independent loan agents many borrowers turn to in hopes of getting the best rate on a mortgage from a bank or finance company.
Brokers are lobbying hard to avoid being singled out, arguing that banks and mortgage companies create the loans and set the ground rules for how brokers are paid. They also say that any federal legislation that requires brokers to be licensed should apply to staff loan officers at banks and mortgage companies too. "We're getting a lot of the blame, but there are a lot more players here," said Harry Dinham, past president of the National Assn. of Mortgage Brokers. "Everybody played a part in what's taken place. . . . We're looking for genuine fairness here."
Although lenders have strongly resisted new regulation, the ongoing mortgage mess has enhanced the credibility of consumer advocates. These activists have complained about predatory lending practices for years -- especially in the sub-prime market for borrowers with imperfect credit.
"The sub-prime meltdown and the Democratic control of Congress only put them [consumer advocates] in a better position," said Wright Andrews, a veteran lobbyist for mortgage lenders. "I don't see any way that legislation could pass that is not going to have a much tougher overall standard."
