Consumers Win With New Financial Reform Bill

[ProSense]

Gary Rivlin

Consumers Win With New Financial Reform Bill

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The deeper my reporting took me, the more I became convinced that it's consumer protections, not rules aimed at reigning in Wall Street, that could have been the silver bullet that prevented the worst of the subprime fiasco. And it's on that front where the Dodd-Frank bill is the strongest.

"The bank regulators did little or nothing to protect consumers from these toxic financial products which inflicted such grievous economic harm," said Bill Brennan, a Legal Aid lawyer who has been running the Home Defense Project in Atlanta since the late 1980s. "We've desperately needed an agency like this for 20 years."

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Under Dodd-Frank, at least there now will be a law dictating that a lender is legally responsible for assessing a borrower's ability to pay. The Center for Responsible Lending, a non-partisan policy and research outfit, dubbed the new rule a "strong" and "prudent" one, and there's also the view of Bill Brennan, the Atlanta Legal Aid lawyer. Brennan first got involved in the fight against predatory mortgage lending in 1991, when an 80-year-old woman named Annie Lou Collier walked into his office. She was petrified at the prospect of losing her home of 37 years because she had been hoodwinked, "Tin Men"-style, into taking out a home loan carrying a 25 percent interest rate and with 20 percent in upfront costs. "Basing a mortgage on a person's ability to pay has been the key to this whole thing," Brennan said.

This legislative package addresses another of the bad practices that helped to fuel the subprime disaster by banning what people inside the industry call a "yield spread premium." That's basically a fancy term for the kickback lenders paid mortgage brokers willing to steer customers into higher-priced subprime loans. So what if Mrs. Jones qualified for a 6 percent mortgage? Put her in a higher interest loan carrying more fees and that could mean a commission equal to 2 percent of the loan amount -- a $4,000 bonus, for instance, on a $200,000 loan.

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[ProSense]

1. No comment? n/t

[impik]

3. Of course not. What could they say.

[ProSense]

4. Obviously, nothing. n/t

[vaberella]

2. I think they won. Most econs think so too. Some on DU & Feingold tell me no.

:kick: 'n' Rec.