Legislative News

Wednesday morning, by a vote of 63 to 36, the Senate adopted an amendment to the financial regulatory reform legislation (S. 3217) by Senator Merkley (D-OR) that would ban mortgage brokers and loan originators from receiving payments that are based on the terms of the loans they sell. It also would bar lenders from making loans without first verifying that a borrower could repay the loan. It would retain the underlying legislation's risk-retention language. Senator Merkley amendment would not have any home borrower down-payment requirement, which the Senator said could hurt first-time homeowners who rely on programs such as FHA insurance to secure a mortgage. "That line is a line of great concern for those of us who have had experience with first-time homebuyers, those of us who have had experience with families who are at the bottom of the income spectrum," Merkley said.


The Senate subsequently rejected an amendment by Senator Corker (R-TN) by a vote of 57 to 42 that would have instructed federal regulators to write minimum mortgage underwriting rules that mandated a down payment of 5 percent by borrowers as well as private mortgage insurance for those with a loan-to-value ratio of more than 80 percent. The Corker Amendment would have also stripped the 5-percent risk retention requirement and call for a study on the issue.

Separately, senators Mary Landrieu (D-LA), Kay Hagan (D-NC), Robert Menendez (D-N.J.) and Mark Warner (D-VA) have proposed an amendment to the legislation that would not apply the 5% risk retention requirement to safer home mortgages, such as a 30-year fixed-rate loan with documented income and assets and a debt-to-mortgage rate of no more than 45 percent of monthly income.



Tuesday, the Senate rejected by a vote of 56 to 43 an amendment by Senator John McCain (R-AZ) that would have ended conservatorship of Fannie Mae and Freddie Mac and spin them off as private businesses. The Senate instead adopted an amendment by Senate Banking Committee Chairman Dodd (D-CT) that would require a Treasury Department study on options for ending the federal takeover, including liquidation of the two mortgage giants, privatizing them, or breaking them up into smaller companies.