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House committee holds mortgage and forclosure legislation hearing

[JURIST] House Financial Services Committee [official website] Chairman Barney Frank (D-MA) said during a Committee hearing [materials] Friday that providing inducements to those who hold liens was the only practical legislative solution to the country's so-called "sub-prime mortgage collapse," and that House legislation passed Wednesday will effectively provide those inducements. The Foreclosure Prevention Act of 2008 [HR 3221 materials; House debate video, flash] provides for government grants allowing municipalities to buy and redevelop foreclosed properties, and would allow the federal government to provide additional financial backing to the publicly supported Fannie Mae and Freddie Mac [corporate websites] mortgage companies. The bill passed [JURIST report] by a vote of 272-152, and Frank said it is expected to be approved by the Senate later this week. Rep. Maxine Waters (D-CA) supported the legislation during Friday's hearing but also stressed her support of the proposed Foreclosure Prevention and Sound Mortgage Servicing Act of 2008 [HR 5679 materials and text], which would require mortgage lenders to offer loss-mitigation programs for mortgagees in danger of foreclosure. She said that without the imposition of such a statutory duty on lenders, consumers would have little leverage and protection against predatory lending.

Earlier this month, the Federal Reserve Board approved new rules for home mortgage loans [draft regulations, PDF; JURIST report] designed to reduce unfair lending practices and increase consumer protection. In June, the Federal Bureau of Investigation (FBI) [official website] announced that more than 400 people had been indicted [press release; JURIST report] for fraud involving individual mortgages and the US Attorney's Office for the Eastern District of New York [official website] announced the indictments [text, PDF; press release] of two senior hedge fund managers at Bear Stearns [corporate website] for allegedly misleading investors even after they knew their mortgage-related funds were at serious risk of collapse.

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