The Mortgage Reform and Anti-Predatory Lending Act of 2007, introduced by Rep. Brad Miller (NC-13), passed the House of Representatives this Thursday. The bill passed by a vote of 291 to 127

The comprehensive anti-predatory lending legislation will help stop bad loans from being made, and will make sure that consumers get mortgages they can repay. Rep. Miller, Rep. Mel Watt (NC-12), and House Financial Services Committee Chairman Barney Frank introduced the bipartisan national legislation to address the mortgage crises.

Specifically, the bill will do the following:

Requires lenders to ensure a borrower's ability to repay. The bill establishes a simple federal standard for all home loans: institutions must ensure that borrowers can repay the loans they are sold. Lenders would have to determine that a borrower has a "reasonable ability to repay," based on income, credit history, indebtedness and other factors. For refinancing, the bill will require that all loans provide a net tangible benefit to the consumer.

Prohibits certain unfair lending practices. The bill prohibits financial incentives for higher cost loans that encourage lenders to steer borrowers into more costly loans, including the bonuses known as "yield spread premiums" that lenders pay to brokers for getting them in a loan with a higher interest rate the borrower qualified for. The bill limits the prepayment penalties charged to borrowers who wish to close out their loans, typically to refinance on more affordable terms.

Establish federal minimum requirements while enabling states to impose tougher rules. Federal rule-making and enforcement duties would go to Federal agencies such as the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corp. and the Federal Trade Commission. The bill’s provisions (except for those specifically affecting secondary market liability as set forth narrowly in the bill) will set a floor so that all Americans are protected, but allow states to enact tougher

Stronger consumer protections for high-cost mortgages. Title III, which is based on the groundbreaking North Carolina law. Patrick McHenry offered an amendment to strike this provision. The amendment failed by a bipartisan vote of 168 to 245. The bill expands the protections available under federal rules on high-cost loans -- lowering the interest rate and the points and fee triggers that define high cost loans. The bill further enhances consumer protections for “high-cost loans” by:

• prohibiting practices that increase the risk of foreclosure, such as balloon payments, encouraging a borrower to default, and call provisions,
• prohibiting excessive fees for payoff information, modifications, or late payments,
• prohibiting the financing of points and fees, and
• requiring more pre-loan counseling.