House Passes Bill Revamping Mortgage Lending

A bill aimed at protecting borrowers from abusive home loans passed the House yesterday evening but faces a tougher future in the Senate because of opposition by the mortgage industry and criticism from the Bush administration.

Sen. Christopher J. Dodd, the Connecticut Democrat and presidential candidate who heads the Senate Banking Committee, is planning to introduce a similar bill in the coming days. The White House is critical of the bill but has not promised a veto.

Proponents of the lending changes say the tumult in the mortgage market could have been averted had stronger federal laws been on the books years ago.

Democrats and consumer advocates have said that many subprime loans, made to people with weak credit, were essentially predatory: containing confusing terms, generating high fees for mortgage lenders and forcing low-income borrowers into loans they can't repay.

The House bill would ban lenders from making loans that borrowers can't repay, create a nationwide licensing system for mortgage brokers and make Wall Street banks that package mortgage securities into investments liable for violations of lending laws.

The bill passed 291 to 127, with support from 64 House Republicans. No Democrats were opposed.

Many House Republicans echoed banking industry criticisms, calling the bill an overreaction to the mortgage market's woes and warning of a flood of lawsuits if it becomes law. They also said the mortgage industry has pulled back from lax lending practices common at the tail end of the housing boom.

"Have no doubt, this bill will limit credit availability and options for thousands of Americans who want to grab their share of the American dream of homeownership," Kieran P. Quinn, chairman of the Mortgage Bankers Association, said in a statement.

Meanwhile, Sen. Tom Coburn (R-Okla.) yesterday blocked an effort by Senate Majority Leader Harry M. Reid (D-Nev.) to get quick approval of a bill to expand authority for the Federal Housing Administration, which insures loans made to low-income borrowers.

A similar bill, backed by the Bush administration, passed the House in September.

It would permit the agency to insure loans at large as $417,000 -- about $54,000 more than the current limit. The government estimated that it could enable more than 200,000 homeowners whose loans are excluded from federal backing to come under the agency's umbrella.