Frank calls for legal changes

U.S. Rep. Barney Frank, chairman of the House Financial Services Committee, said last week that a change in federal law is needed to prevent future abuses in the mortgage industry and restore investor confidence.
“We are now in the most serious financial crisis the world has seen since the late ’90s,” Frank said at a committee hearing last Tuesday. “It is inconceivable to me that we the Congress, and the regulators, working together, would do nothing to diminish the likelihood” of future abuses.
Legislation introduced Oct. 22 would require lenders to ensure borrowers are approved only if they have a “reasonable” ability to repay, would ban pre-payment penalties on subprime loans and would require all mortgage brokers and other originators to be licensed and registered.
The Massachusetts Democrat fended off Republican criticism of a provision to hold mortgage securitizers partly responsible for bad loans, saying it would be “market enhancing” by offering investors more assurance.
Committee Republicans criticized the plan, saying it could stifle lending to consumers with less-than-perfect credit.
“We still have to remember that millions of people have homeownership opportunities because of the subprime market,” said U.S. Rep. Jeb Hensarling, R-Texas. “I am very wary of any legislation that could undercut that market.” •