Bond Market Association, securitization group comment on Ney-Kanjorski bill
By MortgageDaily.com staff
3/21/2005

Groups representing secondary market players commended the newly introduced national anti-predatory lending bill that will slash the liability of subprime loan buyers and assignees.

The bipartisan Responsible Lending Act, introduced by Reps. Robert Ney, R-Ohio, and Paul Kanjorski, D-Penn., clarifies that loan assignees will not be held liable for the violations of lenders if they abide by reasonable standards and procedures when purchasing loans. And, by also preempting state laws, the legislation "will preserve the benefits of subprime lending while helping to rid the market place of destructive predatory lenders," the Bond Market Association and the American Securitization Forum announced.

Recently enacted state laws "unfairly" place the entire liability of lenders' actions on those who purchase loans and among other activities assemble them into pools creating mortgage-backed securities. Therefore, even though the assignees have no control over instances in which the lender violates terms of the new statutes, they would be subject to all of the penalties listed for the lender.

"In the face of such potentially unlimited liability, the secondary market would cease to purchase the affected loans," the groups said.

Additionally, since repackaging loans as MBS transfers the interest rate and credit risk of mortgages to investors and frees up more funds for lenders to make new loans, sole responsibility on secondary market participants would "ultimately have the effect of limiting credit for those who need it most," according to the announcement.

"Using unbounded assignee liability to combat predatory lending is bad public policy that Congressmen Ney and Kanjorski are wisely trying to stop," said Bond Market president Micah Green in the prepared statement.

Article © MortgageDaily.com All Rights Reserved