The Homeownership Preservation and Protection Act of 2007

BY: NCRC

Sponsored By:

Senator Dodd (D-CT)

Current Co-sponsors of the Bill include:
Senator Reed (D-RI), Senator Schumer (D-NY), Senator Menendez (D-NJ), Senator Akaka (D-HI), Senator Brown (D-OH), Senator Casey (D-PA), Senator Kennedy  (D-MA), Senator Kerry (D-MA), Senator Harkin (D-IA), Senator Mikulski (D-MD), Senator Boxer (D-CA), Senator McCaskill (D-MO), Senator Klobuchar (D-MN), Senator Feinstein (D-CA)

For a comparison matrix of anti-predatory lending proposals click here

What The Homeownership Preservation and Protection Act calls for:

Protections for all loans include:

•    Fiduciary duty relationship for broker to borrower.
•    Prohibition of steering by a broker or creditor to a higher priced loan than that which the borrower qualifies.
•    Ability to repay based on debt to income and residual income analysis, along with W-2, pay stubs, bank records or best available documentation. This provision bolsters the lender’s assessment of borrowers who might otherwise be guided to low-doc or no-doc loans.
•    Establishes a reasonable care standard for lender to act in good faith.
•    Acquirers of foreclosed properties must adhere to tenant leases.
•    Protections against servicer abuse and requirements for services to promptly credit borrower payments, including escrow
•    Servicers must make reasonable efforts to offer loss mitigation including loan modifications in order to avoid foreclosures.
•    Protections against appraiser fraud, including the prohibition against a creditor seeking to influence an appraisal
•    Notification of available housing counseling upon delinquency of payment
•    Lender prohibited from recommending default on an existing loan prior to refinancing borrower.

Liability for all loans includes:

•    Right of rescission
•    Increase in civil penalties awarded
•    Securitizer / Holder (that is, secondary market) is liable to individual borrowers in all cases and to class action in high cost, subprime and non-traditional lending.
•    Prohibition of mandatory arbitration

Protections Applied to High Cost loans:

•    No prepayment penalties
•    No balloon payments
•    No yield spread premiums
•    No financing of points and fees
•    No evasions or structuring a loan for the purpose of evading high-cost loan provisions
•    No modification or deferral fees unless modifications result in lower APR and fee is reasonable and bona fide
•    A net tangible benefit standard is established when a high-cost loan refinances a prior loan.


Protections for Subprime and Non- Traditional Loans

A debt to income analysis must involve monthly principal, interest, tax and insurance in repayment analysis. The borrower’s residual income is taken into account in ability to pay analysis.

Escrows required.

A net tangible benefit standard is established when a subprime or non-traditional loan refinances a prior loan.

No prepayment penalties or yield spread premiums allowed on subprime and non-traditional loans.

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