Mortgage industry and business groups are urging lawmakers to drop pieces of a housing bill they say would be too restrictive on lenders.
Six trade groups on Tuesday told lawmakers shepherding a comprehensive package of housing legislation through Congress that the bill would impose too-strict standards on lenders, requiring them to determine what kind of loan is best for each borrower.
That standard will expose lenders to potential lawsuits, and force them "to reduce the number and type of products to consumers," according to a letter written by the Mortgage Bankers Association, U.S. Chamber of Commerce and other groups to Sens. Christopher Dodd, D-Conn., and Richard Shelby, R-Ala., the two senior members of the Senate Banking Committee.
The letter also criticized a portion of the bill that creates a nationwide licensing system for mortgage brokers and loan officers.
The groups say federal regulators should oversee the system, rather than the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators, which have been putting together a national licensing system since 2004.
The industry groups expressed support for more prominent pieces of the housing package, including a new program under which the government will help refinance around 400,000 new loans for struggling homeowners, and tighter regulation of government-sponsored mortgage finance companies Fannie Mae and Freddie Mac.
The bill also changes the limit on the size of loans that can be purchased by Fannie and Freddie to $625,000, up from their traditional limit of $417,000. The limit has temporarily been raised to as high as $729,750 in expensive parts of the country as a result of the economic stimulus package signed by President Bush in February.
The banking panel passed an earlier version of the bill last month, and the full Senate was expected to vote on it as soon as this week.
Dodd said in a statement that the bill "takes important steps toward restoring safety and stability to the housing markets."
A Dodd spokeswoman wasn't immediately able to comment on the industry's criticism. A Shelby spokesman declined to comment.
Also signing the letter were the American Financial Services Association, the Consumer Bankers Association, the Consumer Mortgage Coalition and the Financial Services Roundtable.