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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