A leading Democratic congressman has told Connecticut housing advocates that there needs to be much stricter regulation of the mortgage industry. Barney Frank, chairman of the House Financial Services Committee has just introduced legislation to toughen oversight of lending practices.
Barney Frank addressed the conference of the Connecticut Housing Coalition within hours of introducing the bill. The legislation would ban incentive payments to brokers for selling overly expensive loans; it would make sellers of mortgage-backed securities explicitly liable for lending violations; and it would require mortgage brokers to be licensed by state or federal authorities. Frank says the current subprime crisis is an example of how innovation in financial services can sometimes outstrip regulation.
The measures contained in the bill would help future borrowers, but Frank says he also wants to help those in difficulties in the current lending crisis. He plans hearings next week to examine efforts to persuade lenders to modify rates being levied on already overstretched borrowers. He says a new wave of foreclosures would be in no-oneâ€™s interest.