Kanjorski plan for mortgage reform passes U.S. House
WASHINGTON — A mortgage reform bill has been approved by the full U.S. House of Representatives, with appraisal and mortgage servicing provisions authored by Rep. Paul Kanjorski, D-11, intact.
The bill — approved 300-114 — addresses Pocono home sale abuses aired during a 2004 hearing at East Stroudsburg University of Kanjorski's subcommittee on capital markets, insurance and government sponsored enterprises.
"Since we encountered these problems in the Poconos about eight years ago, I have sought to develop new federal laws to protect homeowners," Kanjorski said. "This bill, strengthened by my legislation to ensure more accurate home value estimates and improve servicing, will suppress many existing predatory lending practices and make industry more responsive for its actions."
Inflated appraisals were used early this decade to sell Pocono homes for more than they were worth at the time on the local market. Many point to inflated appraisals nationwide as a key factor triggering the current financial meltdown.
The bill calls for tighter oversight of appraisal management companies that are often subsidiaries of lenders. Some lenders use the subsidiaries to hand-pick appraisers who can be pressured to produce higher appraisals, justifying higher loans.
"In the lead up to the housing market collapse, the industry was rife with appraisal abuse," said John Taylor, CEO of the National Community Reinvestment Coalition, a consumer group of more than 600 community organizations.
"Aiming for numbers that reflected a desire to make a loan, and not the true value of the property, inflated the housing bubble and caused untold damage to homeowners across the country."
Taylor said Kanjorski's amendments offer strong protection against such abuses.
Federal authority to monitor and assist state appraisal regulatory agencies would be strengthened under the bill. All borrowers with blemished credit records would be granted access to on-site appraisal inspections.
The bill also addresses issues involving companies that service mortgages. It codifies rules on escrowing for taxes, properly crediting payments and payoff statements.
The Senate is expected to consider the House bill later this year.