Congress has a new top legislator for mortgage matters.
| For the American mortgage market, it could be the hottest buzzword of the year: suitability. That’s because Congress has a new top legislator for mortgage matters, Rep. Barney Frank, who believes that “you shouldn’t lend (home buyers or refinancers) more than they can afford to pay back, and you don’t lend them more than their house is worth.” Frank, a 14-term Massachusetts Democrat, is the new chairman of the House Financial Services Committee — the primary originator of banking and mortgage-related federal legislation. In an interview, he made it clear that a top priority this year will be enactment of a nationwide lending-standards law designed to protect consumers from deceptive, unfair and predatory mortgage practices. | 
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With foreclosures rising and many credit-stressed homeowners facing imminent rate resets on controversial “payment-option” and other adjustable-rate loans, pressure is building on Capitol Hill for tougher rules for mortgage brokers and lenders. A recent study by the Center for Responsible Lending predicted that as many as 1 of every 5 subprime borrowers who took out reduced-payment, low-documentation mortgages between 1998 and mid-2006 could ultimately lose their homes because of steep payment increases and penalties they can’t handle. Proponents of a suitability standard would require loan officers — whether mortgage brokers or retail lenders — to make certain that applicants are financially capable of handling a particular loan before and after payment increases, and that they fully understand the cons as well as the pros of the mortgage type they select.
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