Proponents and critics agree that if enacted the Mortgage Reform and Anti-Predatory Lending Act will transform major portions of the home loan transaction for prime and subprime borrowers.

As written, the bill will impose a new “federal duty of care” standard on anyone who originates a home loan – whether a broker, retail lender, credit union loan officer or employee of a large mortgage bank. That federal standard will require all originators to be licensed and registered at the state or federal level; to offer applicants only “appropriate” mortgage loans; and to make full disclosures to consumers about all the key features and costs of the loans they obtain.

At a Congressional committee hearing last Wednesday, mortgage brokers welcomed the concept of nationwide licensing and registration of all originators – something they’ve advocated for years as a way to eliminate unethical loan officers from the business. But they strongly opposed the plan to prohibit yield-spread premiums, arguing that it would prevent cash-poor borrowers from financing their closing costs by raising the note rate.

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