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In DC, Predatory Lending Bill Draws Doubt from Consumers, Praise from Brokers

Byline: Matthew R. Lee of Inner City Press in DC: News Analysis

WASHINGTON, November 14 -- On the eve of a scheduled vote on anti-predatory lending legislation in the House of Representatives, changes were introduced which led many mortgage brokers to express support for the bill, while most grassroots community groups came out against it. The consumer activists say that the bill lets Wall Street off the hook, shielding those who trade and buy even abusive loans from so-called assignee liability. Recent business news, they say, identifies those who made the real money off predatory lending among those who had to declare big losses when the music stopped: Merrill Lynch and Bear Stearns, for example, and most recently Citigroup, whose chief executive officer Chuck Prince had to fall on his sword, albeit with $90 million. Just before the fall, Citigroup went even deeper into subprime with a purchase from the bankrupt Ameriquest. The groups see Wall Street's finger prints on the legislation's limitations, and predict that when the pendulum swings and conditions permit, these same firms would begin the cycle again.

            Even a provision that would have offered tenants in buildings foreclosed on protection for 90 days, an issue championed by House Financial Services Committee chairman Barney Frank (D-Mass.), is apparently being weakened. Meanwhile, the focus of the investment banks, and of major regulators, has been on arranging what is essentially a bail-out of Wall Street and their Structured Investment Vehicles (SIVs). The Treasury Department has been involved in designing the bail-out. The Federal Reserve, which was hands-off while the largest banks it regulates turned predator, has remained hands-off on this as well.

Citigroup: hurt in the market, still reigning on Capitol Hill

            The mortgage brokers are reportedly enamored of the provision in the bill that would legitimize so-called yield spread premiums, in which brokers are paid extra for charging borrowers more than their credit scores would require. All that the brokers would be required to do is make additional disclosure. If after the subprime meltdown, "Buyer Beware" is the best that Congress can do, it's not worth it, the groups say.

News analysis: The worst part, the groups say, is that there's not even yet any companion bill in the Senate, and if and when there is, it will probably be even weaker. Then there's the question of veto. Still, the battle lines are drawn, and consumers (for now) being routed.

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