New Predatory Lending Legislation a Possibility

Yesterday's New York Times reports that Congressional Democrats are contemplating new predatory lending legislation.  Representative Barney Frank, chair of the House Financial Services Committee, plans to move a bill that "would give borrowers and others the ability to sue the Wall Street firms that package those mortgages and then sell them as mortgage-backed securities, as well as the purchasers of those securities in the secondary market" while Senate Democrats, including Senators Dodd and Schumer, are also looking into the matter.  I wonder if Congress will consider eliminating the authority of federal regulators to preempt state predatory lending statutes as to federally-chartered and regulated financial institutions.

Comments

[Andrew Engel]

Not a good idea. Securitizers are too high on the tree to be held accountable for what the originators do, UNLESS there is some actual culpability. Funding lenders should be held accountable, but people further down the stream, if honest, should not be to answer for another's fraud or misconduct. Holder-in-due course in reality. A funding lender, however, should not be able to use HDC status to evade liability for an originator's misdeeds. Why, because they were on the scene and actually looked at the loan before it was funded. I draw the line there.