WASHINGTON WEEKLY
Keeping the Markets Informed from the Capital
October 26, 2007
SIFMA and ASF Address Provisions in the Mortgage Reform and Anti-Predatory Lending Act
House Financial Services Committee Chairman Barney Frank (D-MA) introduced a mortgage reform and anti-predatory lending bill this week. The Mortgage Reform and Anti-Predatory Lending Act (H.R.3915) establishes a minimum standard for all mortgages which requires that borrowers must have a reasonable ability to repay. H.R.3915 imposes limited liability to securitizers who package and sell mortgages which do not meet certain standards. During a legislative hearing on the bill this week, Marc Lackritz, president and CEO of SIFMA, testifying on behalf of SIFMA and the American Securitization Forum (ASF), expressed concern that several provisions in H.R.3915 could significantly reduce funding from the secondary market and cut off credit for worthy subprime borrowers. SIFMA and the ASF said it was critical the bill establish a clear national standard, which preempts state action.
Jim McCarthy, Managing Director, Retirement Plan Services, Morgan Stanley, testifying on behalf of SIFMA before the House Small Business Committee on Finance and Tax, called on Congress to enhance the SIMPLE IRA by increasing the contribution limit and providing more flexibility in the arrangements.
In testimony submitted for the record of a House Judiciary Subcommittee on Commercial and Administrative Law hearing, SIFMA said the Arbitration Fairness Act of 2007 (H.R.3010) would undermine a highly evolved forum with a proven track record of outstanding service to investors.
The House approved by voice vote legislation (H.R.2868) that would allow the U.S. national stock exchanges to create “developmental listing tiers” for smaller companies.
The House Ways and Means Committee approved legislation (H.R.3920) that would extend and expand the Trade Adjustment Assistance program. The bill authorizes new tax-credit bond and tax-exempt bond authority to be used in newly designated manufacturing redevelopment zones. H.R.3920 would also delay the effective date of the modified interest expense allocation rules enacted in 2004. SIFMA sent letters to Ways and Means Chairman Charles Rangel (D-NY) and Ranking Member Jim McCrery (R-LA) expressing concern over the delayed effective date.
The House Energy and Commerce Subcommittee on Commerce, Trade and Consumer Protection approved by voice vote legislation that would authorize the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC) to develop comprehensive rules to identify and prohibit unfair and deceptive practices.
House Ways and Means Committee Chairman Charles Rangel (D-NY) introduced what he calls the “mother of all tax reform bills" this week. The comprehensive bill (H.R.3970) extends the AMT patch through 2007. Beginning in 2008, the AMT is repealed and replaced with a surtax on modified AGI above $150,000 ($200,000 for married taxpayers). The bill also reduces the corporate tax rate. The bill is fully paid for with offsetting tax increases on businesses and individuals.
During the Senate Special Committee on Aging hearing on 401(k) fees, Chairman Herb Kohl (D-WI) called for 401(k) fees to be expressed as a single figure that the average person could understand.
Walter Lukken, acting chairman, Commodity Futures Trading Commission (CFTC), recommended Congress review whether the CFTC has adequate authority to police fraud, particularly in the foreign currency markets.
During a Senate Banking Subcommittee on Securities, Insurance and Investment hearing on the convergence process between U.S. GAAP accounting standards and the International Financial Reporting Standards (IFRS), Subcommittee Chairman Jack Reed (D-RI) said the goal of convergence is one we can all support, but there are steps that must be taken before we get there.
Nineteen Democratic members of the House of Representatives sent a letter to House leadership urging legislation related to the use of social security numbers (SSN) be modified to incorporate the legitimate use of SSNs by financial institutions.
Members of the Blue Dog Coalition sent a letter to House Judiciary Committee Chairman John Conyers (D-MI) and House Judiciary Subcommittee on Commercial and Administrative Law Chairwoman Linda Sanchez (D-CA) urging the Judiciary Committee to continue its oversight of the Bankruptcy Abuse Prevention and Consumer Protection (BAPCPA), but refrain from amending the law prematurely.
SIFMA and ASF Testify on Mortgage Reform Proposal
Testifying on behalf of SIFMA and the American Securitization Forum (ASF) during the House Financial Services Committee on legislative proposals to reform mortgage practices, Marc Lackritz, president and CEO of SIFMA, commended Committee Chairman Barney Frank (D-MA) and his staff for a fair and participatory process in the development of the Mortgage Reform and Anti-Predatory Lending Act (H.R.3915). Lackritz praised the Committee for staying true to a simple principle – namely, that a borrower should not get a loan that he or she cannot afford and from which he or she does not benefit. He urged the Committee to bear in mind as they move forward that there are limits to the liability that loan purchasers will accept without taking their money and investing elsewhere, especially when it involves increasingly global capital flows.”
SIFMA and the ASF believe the single biggest deficiency in the bill is the lack of federal preemption of state laws. Without preemption, H.R.3915 would add to the patchwork of mortgage lending regulation and will increase the costs of compliance which will likely be passed on to end borrowers. Lackritz said although SIFMA and the ASF do not think that liability for the secondary market for actions of brokers or originators is appropriate, the organizations recognize and appreciate the bill limits the exposure of the secondary market investors and trusts. Lackritz urged clarification of the bill’s safe harbor provision; clarification of the definition of qualified mortgage, and clarification of the definition of assignee. SIFMA and the ASF are concerned that the combined effect of the limited rescission liability and the expansion of HOEPA included in the bill could cause only those loans qualifying for the safe harbor to be made. During the hearing, Chairman Barney Frank (D-MA) agreed with SIFMA and ASF’s points on the need to revisit the bill’s safe harbor provision, statute of limitations and the issue of preemption.
Also during the hearing, Martin Gruenberg, Vice Chairman, Federal Deposit Insurance Corporation (FDIC), said the proliferation of securitization as a funding method has changed the financial system by moving large volumes of assets off the balance sheets of federally-insured financial institutions. Vice Chairman Gruenberg said it is important to address assignee liability as a meaningful check on abuse by originators. John Dugan, Comptroller of the Currency, Office of the Comptroller of the Currency (OCC), said the OCC supports the establishment of national standards for subprime mortgages similar to the federal banking agency standards. Dugan said while the OCC supports some of the broader standards included in H.R.3915, others raise questions and concerns that should be addressed as the process moves forward. The federal duty of care and anti-steering provisions--which include highly subjective requirements--will be difficult to enforce and could significantly increase the litigation exposure of all banks. Randall Kroszner, member, Board of Governors of the Federal Reserve Board, said the Federal Reserve plans to propose rules under its rulemaking authority under HOEPA to address unfair or deceptive mortgage lending practices by the end of the year. The rules will address prepayment penalties, failure to offer escrow accounts, stated-income and low-documentation lending and failure to give adequate consideration to a borrower's ability to repay. Kroszner warned the securitization market is critical to increasing the resources available to fund home purchases and great care should be taken to ensure investors in the market can quickly and accurately assess and mitigate risk.
SIFMA Calls for SIMPLE IRA Enhancements
In testimony before the House Small Business Subcommittee on Finance and Tax this week, SIFMA urged Congress to make enhancements to SIMPLE IRAs to encourage more small business employers to sponsor retirement plans. Jim McCarthy, Managing Director, Retirement Plan Services, Morgan Stanley, testifying on behalf of SIFMA, agreed that cost and complexity were the main barriers to plan sponsorship. He identified the important milestones when plan sponsors are more likely interested in setting up a plan, such as when the business has more reliable revenue and turns profitable. He also discussed the importance of the involvement of a professional such as an accountant or a personal adviser to educate the business owner about the benefits of sponsoring a retirement plan. SIFMA recommended enhancing the SIMPLE IRA by increasing the contribution limit and providing more flexibility in the arrangements. SIFMA also recommended the Subcommittee consider expanding the small business pension plan start-up credit to those businesses that offer payroll deduction IRA.
Subcommittee Chairwoman Melissa Bean (D-IL) said she was interested in identifying any disparities between the treatment of small business owners/employees and larger businesses. Catherine Collinson, Senior Vice President, Strategic Planning, Transamerica, recommended enhancing the start-up credit by increasing the number of years it is available as well as increasing the amount of the credit; further simplifying compliance testing; considering ways to promote multi-employer plans for small businesses; enhancing the SAVER's Credit; and creating a tax incentive for the purchase of annuities. She also emphasized the need to promote the various savings incentives, and specifically identified a lack of awareness of the SAVER's credit. Sal Tripodi, TRI Pension Services, testifying on behalf of American Society of Pension Professionals & Actuaries (ASPPA), highlighted proposals to create a mandatory payroll deduction IRA for businesses that do not offer retirement plans. He also supported an enhanced SAVER's credit and encouraged the Committee to look at ways to deposit the credit directly into a savings account. Paula Calimafde, testifying for the Small Business Council of America, discussed several positives in the small plan market, including the fact that many full-time small business workers are covered but that statistics focus on part-time workers as well as full-time workers. She opposed increasing the SIMPLE IRA contribution limit. She believes that the most helpful initiative to encourage plan sponsorship would be a repeal of the top heavy rules for 401(k) plans. She also encouraged the Committee to consider the Employer Retirement Savings Account (ERSA), as proposed by the Bush Administration.
SIFMA Says Arbitration is Faster and Fairer than Court-Based Litigation
In testimony submitted for the record of the House Judiciary Subcommittee on Commercial and Administrative Law hearing on the Arbitration Fairness Act of 2007 (H.R.3010), SIFMA said H.R.3010, introduced in July by Rep. Hank Johnson (D-GA), would undermine a highly evolved forum with a proven track record of outstanding service to investors. For thirty years, securities arbitration has been closely regulated by the SEC and the Financial Industry Regulatory Authority (FINRA). The tight regulation and strict oversight has resulted in a number of procedural safeguards that protect investors and ensure fairness. SIFMA said securities arbitration allows investors to pursue small claims, provides a friendly forum for pro se investor claimants, lowers overall costs borne by investors and securities firms and secures the oversight of expert regulators, all within a framework that was specifically designed for investor claims and has demonstrated fairness for decades. SIFMA urged Congress not to disturb a system that is working successfully.
During the hearing, Subcommittee Chairwoman Linda Sanchez said arbitration was never intended to be a biased process. Ranking Member Chris Cannon (R-UT) said he thought the Subcommittee’s last hearing on arbitration conclusively found that arbitration provided a fair and cost-effective forum for dispute resolution. Rep. Johnson questioned the neutral nature of an arbitration business which makes it profits from arbitration fees, repeat business, and referrals for arbitration. Richard Naimark, American Arbitration Association (AAA), said arbitration is the only viable recourse for consumers and employees. Naimark warned against any legislation which would modify the Federal Arbitration Act and said if Congress wants to address arbitration, it should be done in such a way so as not to undermine the perceptions of domestic and international arbitration systems. Professor Peter Rutledge, Columbus School of Law, The Catholic University of America, said if arbitration was abolished and companies were forced to go to jury trials, the increased cost of operation would lead to lower wages for workers of that company, higher prices of their products, and lower share prices. Theodore G. Eppenstein, Esq., said he does not believe mandatory arbitration works for the investor based on figures he says demonstrate a decrease in the customer case “win rate” and customer recovery amounts. Rutledge argued Eppenstein’s statistics did not accurately represent the state of securities industry arbitration.
SIFMA also submitted for the record its white paper on Arbitration in the Securities Industry, released this week in conjunction with its Compliance and Legal Division. In the white paper, SIFMA argues securities arbitration is fairer, faster, more accessible and less expensive for investors than litigation. According to the white paper, arbitration cases are resolved 40 percent faster than court cases. A recent survey of securities arbitration participants found approximately 93 percent of those surveyed believed their case had been handled fairly and without bias. SIFMA argues there is no credible evidence that SRO-regulated arbitration is unfair to investors or otherwise fails to protect their interest. Arbitration permits investors with claims too small to litigate a cost-effective opportunity to be heard and provides those with larger claims a forum capable of bringing experience and knowledge to bear in resolving their disputes.
House Approves Small Cap Competitive Listing Act
The House approved by voice vote legislation (H.R.2868) that would allow the U.S. national stock exchanges to create “developmental listing tiers” for smaller companies or those with less traditional business models. The Small Cap Competitive Listing Act, introduced by Rep. Gregory Meeks (D-NY) and Rep. Vito Fossella (R-NY), would amend the National Securities Markets Improvements Act to subject securities in a tier with lower listing standards to both state securities laws and SEC regulation.
Ways and Means Approves TAA Reauthorization
The House Ways and Means Committee approved legislation that would extend and expand the Trade Adjustment Assistance (TAA) program by a vote of 25-14. The Trade and Globalization Assistance Act of 2007 (H.R.3920) also designates twenty-four “manufacturing redevelopment zones” that are eligible for various tax incentives aimed at increasing economic development including new tax-credit and tax-exempt bonding authority for qualified investments in the newly-designated zones. H.R.3920 authorizes $3.6 billion in tax-credit bond authority ($150 million of authority for each zone) for capital investments in the newly-designated zones. The bill also authorizes $5.52 billion of exempt facility bonds ($230 million of authority for each zone) for the purchase of business equipment and depreciable property in the manufacturing redevelopment zones. There is a $15 million limitation per manufacturing redevelopment zone on the amount of bonds allocable to any one person. An amendment to drop the tax-credit bond program from the bill was defeated along party-lines.
Overall, the bill increases spending by $8.7 billion over ten years and provides $2.7 billion of tax incentives for manufacturing redevelopment zones. These costs are primarily offset by extending the 0.2 percent Federal Unemployment Tax Act (FUTA) surtax and by delaying the effective date of the interest expense allocation rules that were enacted as part of the American Jobs Creation Act of 2004. The 2004 law modified the interest allocation rules by allowing a one-time election to allocate interest expenses on a worldwide basis for purposes of the foreign tax credit limitation. The liberalized rule is scheduled to take effect after December 31, 2008. H.R.3920 would delay the effective date by three years. SIFMA sent letters to Ways and Means Chairman Charlie Rangel (D-NY) and Ranking Member Jim McCrery (R-LA) cautioning a delay in the effective date could reduce the global competitiveness of U.S. businesses. The Trade and Globalization Assistance Act of 2007 is expected to be debated on the House floor next week.
Energy and Commerce Subcommittee Approves Banking Regulatory Authority Bill
The House Energy and Commerce Subcommittee on Commerce, Trade and Consumer Protection approved by voice vote legislation (H.R.3526) that would authorize the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation (FDIC) to develop comprehensive rules to identify and prohibit unfair and deceptive practices. Currently only the Federal Reserve Board, the Office of Thrift Supervision and the National Credit Union Administration have that power. Prior to approving the bill, the Subcommittee adopted an amendment offered by Rep. Bobby Rush (D-IL), which calls on the Government Accountability Office (GAO) to conduct a study within two months of enactment on the status of regulations of the Federal banking agencies and the National Credit Union Administration regarding unfair and deceptive practices. The bill was also approved by voice vote by the House Financial Services Committee in September.
Rangel Introduces "Mother of All Tax Reform" Bills
House Ways and Means Committee Chairman Charlie Rangel (D-NY) introduced an individual and corporate tax reform bill that he calls the “mother of all tax reforms.” The Tax Reduction and Reform Act of 2007 (H.R.3970) would repeal the alternative minimum tax (AMT) beginning in 2008 and replace it with a surtax on modified adjusted gross incomes (AGI) above certain levels. Those levels would be determined annually by the Treasury Department. The surtax would equal 4 percent of modified AGI between $150,000 - $250,000 for single taxpayers ($200,000 - $500,000 for married taxpayers). The surtax would increase to 4.6 percent for modified AGI above $250,000 ($500,000 for married taxpayers). The bill would also extend the AMT patch through 2007, increase the standard deduction, expand the Earned Income Credit, and expand the refundable portion of the child tax credit. These provisions are paid for by restoring the limitations on personal exemptions and itemized deductions (both limitations were supposed to begin phasing out this year). In addition, the bill would require brokers to report adjusted basis on securities sales, tax carried interest earned through investment management services as ordinary income and prohibit hedge fund managers from deferring compensation earned through the investment of offshore funds, among other revenue raising provisions.
The bill’s corporate tax title would reduce the top corporate marginal tax rate from 35 percent to 30.5 percent. Tax-exempt entities would also be allowed to invest in onshore hedge funds without incurring Unrelated Business Income Tax (UBIT). These changes are paid for by repealing the manufacturing deduction that was enacted in 2004, repealing the last-in-first-out (LIFO) accounting method for corporations, codifying the economic substance doctrine, deferring U.S. tax deductions associated with foreign-source income until that income is repatriated to the United States, and eliminating the election to allocate interest expense on a worldwide basis. The bill includes several other corporate revenue raisers.
Finally, H.R.3970 extends for one year several tax provisions that expire on annual basis, including the research and development (R&D) tax credit, the Qualified Zone Academy Bond (QZAB) program, and the veterans’ mortgage bond program.
Senate Special Committee on Aging Examines 401(k) Fees
During the Senate Special Committee on Aging, Chairman Herbert Kohl (D-WI) called for 401(k) plan fees to be expressed as a single figure that the average person could understand. Ranking Member Gordon Smith (R-OR) said he believes it is clear that 401(k) participants need additional information on plan fees and expenses, but stressed the disclosure information needs to be concise, meaningful, and readily understandable. Smith cautioned against bombarding participants with too much information, only to have it be potentially ignored, and increase the cost and expenses of operating 401(k) accounts. Bradford Campbell, assistant secretary of labor, Employee Benefits Security Administration, Department of Labor (DOL), said DOL has made significant progress on a series of regulatory initiatives and has a regulation process well suited to improve disclosure. Campbell cautioned the Committee to consider DOL’s successes prior to legislating. Campbell said the DOL would issue a final regulation expanding Form 5500 within the next few weeks. Campbell also told the Committee, DOL expects to publish a proposed regulation requiring specific and comprehensive disclosures to plan fiduciaries by service providers at the beginning of the year. Barbara Bovbjerg, director, Education, Workforce and Income Security Issues, Government Accountability Office (GAO), said the best way to provide information on fees to plan sponsors and plan participants is to make the information clear, comprehensive, and simple. Bovbjerg said plan providers have the ability and the fiduciary duty to provide information on fees charged to plan sponsors and participants.
Robert Chambers, testifying on behalf of the American Benefits Council (ABC), the American Council of Life Insurers (ACLI), and the Investment Company Institute (ICI), said a one-number fee would be hard to deliver and would not be a comparative value for the participants; the historical performance of a fund is also important when comparing investment options. Mercer Bullard, The University of Mississippi School of Law, recommended the best format to convey fees and expenses to participants would be in dollar amounts rather than percent. Michael Kiley, speaking on behalf of the American Society of Pension Professionals & Actuaries (ASPPA) and Council of Independent 401(k) Recordkeepers, urged Congress to act regardless of the efforts of the DOL. As noted below, Chairman Kohl and Sen. Tom Harkin (D-IA) introduced this week the Defined Contribution Fee Disclosure Act of 2007, which would require complete transparency of 401(k) fees to both employers and participants.
CFTC Asks for Additional Enforcement Authority
During a House Agriculture Subcommittee on General Farm Commodities and Risk Management, Walter Lukken, Acting Chairman, The Commodity Futures Trading Commission (CFTC), recommended Congress review whether the CFTC has clear and adequate authority to police fraud, particularly in the foreign currency markets. Lukken also recommended the Commodity Exchange Act (CEA) be amended, such that, upon a determination that an Exempt Commercial Market (ECM) futures contract serves a significant price discovery function, the CFTC would be authorized to 1) require large trader position reporting for that contract; 2) require an ECM to adopt position limits or accountability levels for that contract; 3) require an ECM to exercise self-regulatory responsibility over that contract in preventing manipulation and 4) provide the ECM and the CFTC with emergency authority over the contract. Lukken warned it was critical that any legislative changes should not result in stifling the innovation and other benefits brought about by ECMs and changes should be cost-effective for the CFTC and the industry to implement. He also recommended civil and criminal penalties for price manipulation, false reporting and conversion be $1 million and the maximum prison sentence be increased to ten years.
In a report released earlier this week and discussed at the hearing, the Government Accountability Office (GAO) recommended in light of recent developments in the derivatives markets and as part of the CFTC reauthorization process, Congress should consider further exploring whether the current regulatory structure for energy derivatives provides adequately for fair trading and accurate pricing. The GAO also recommended the CFTC re-examine the classifications in the Commitment of Traders (COT) reports to determine if the commercial and noncommercial categories should be refined to improve the transparency and accuracy of public information on trading activity in the energy futures markets; to explore ways to maintain records of inquiries into possible improper trading activity and the results; to examine ways to more fully demonstrate the effectiveness of its enforcement activities by developing additional outcome-related performance measures. On a related note, in a speech during the U.S. Chamber of Commerce’s Litigation Reform Summit, Kathleen Casey, commissioner, Securities and Exchange Commission (SEC), applauded Congress for weighing the merits of combining the SEC and the CFTC. Casey said the SEC continues to cooperate and collaborate with the CFTC, but Congress has an important role in rationalizing the regulatory framework.
Senate Subcommittee Hears Status Report on International Accounting Standards Convergence Process
Sir David Tweedie, chairman, International Accounting Standards Board (IASB), told members of the Senate Banking Subcommittee on Securities, Insurance and Investment the convergence process between U.S. GAAP accounting standards and the International Financial Reporting Standards (IFRS) is the best chance to merge standards and develop the world's best accounting practices. The IASB and the Financial Accounting Standards Board (FASB) hope the convergence process will result in U.S. GAAP and IFRS being broadly converged by 2011 or 2012. Robert Herz, chairman, FASB, suggested developing a blueprint for coordinating and completing the transition to IFRS agreed to by all major stakeholders. The blueprint should identify the most orderly, least costly and least disruptive approach to transitioning and should include target dates. Charles Landes, vice president, American Institute of Certified Public Accountants (AICPA), said AICPA supports the SEC's proposal to give issuers an option to prepare financial statements according to IFRS, but the SEC must work with others and Congress to ensure the option does not increase the legal liability for preparers and auditors. Terri Yohn, associate professor, Kelley School of Business, Indiana University, warned while the convergence of IFRS with U.S. GAAP is a worthwhile and beneficial goal, the elimination of the required IFRS-U.S. GAAP reconciliation is premature and will cause U.S. investors to possess a significantly diminished set of relevant information for investment related decision making. Yohn said the educational system is not ready for IFRS--educators are trying to incorporate IFRS into lessons, but are still looking into the best way to do it. Subcommittee Chairman Jack Reed (D-RI) said the goal of convergence is one we can all support, but there are steps that must be taken before we get there.
Members Send Letter to Leadership Urging Modification to SSN Bills
Nineteen Democratic members of the House of Representatives sent a letter to Speaker of the House Nancy Pelosi (D-CA) and Majority Leader Steny Hoyer (D-MD) warning the Social Security Number Protection Act of 2007 (H.R.948) and the Social Security Number Privacy and Identity Theft Prevention Act of 2007 (H.R.3046) may have unintended adverse consequences. The signatories said social security numbers (SSNs) continue to serve a vital business, consumer and governmental function. Financial institutions have a proven track record of protecting consumer information and the bills could have a chilling effect on the performance of many important financial services functions. The members call on the federal, state and local governments to work with businesses to develop solutions to protect SSNs and avoid unintended consequences associated with unreasonably restricting the use of SSNs, particularly in the areas of customer identification and verification. The nineteen signatories also urge legislation affecting the use of SSNs be modified to reflect the existing regulatory framework provided by a functional regulator, in order to incorporate the legitimate use of SSNs by financial institutions.
Blue Dogs Caution Against Amending BAPCPA
Members of the Blue Dog Coalition sent a letter to House Judiciary Committee Chairman John Conyers (D-MI) and House Judiciary Subcommittee on Commercial and Administrative Law Chairwoman Linda Sanchez (D-CA) urging the Judiciary Committee to continue its oversight of the Bankruptcy Abuse Prevention and Consumer Protection (BAPCPA), but refrain from amending the law prematurely. In the letter, the Coalition said implementation of the BAPCPA is early in the process, the numbers of Chapter 7 and Chapter 13 proceedings indicate that fewer abusive bankruptcy filings are occurring following the enactment of BAPCPA and it is important for Congress to continue to monitor how the new law is working. Blue Dog Coalition urged the Judiciary Committee to refrain from moving forward on legislation amending BAPCPA until additional data is available regarding its effects, until its regulatory implementation has been completed and until the judicial branch has provided greater clarity with regard to the manner in which its provisions are to be interpreted and enforced.
Bills Introduced This Week
House Financial Services Committee Chairman Barney Frank (D-MA), Rep. Mel Watt (D-NC) and Rep. Brad Miller (D-NC) introduced the Mortgage Reform and Anti-Predatory Lending Act of 2007 (H.R.3915) that would establish a federal duty of care, prohibit steering and call for licensing and registration of mortgage originators, including brokers and bank loan officers. H.R.3915 also sets a minimum standard for all mortgages, which requires that borrowers must have a reasonable ability to repay. Under the bill for loans that violate the minimum standards for reasonable ability to repay and net tangible benefits, a consumer has an individual cause of action against assignees, including securitizers, for rescission of the loan and the consumer’s costs. Securitizers are not liable for loans that violate the minimum standards if the securitizer 1) provides cure to make the loan conform to minimum standards within 90 days of notification; 2) has a policy against buying loans that are not qualified or qualified safe harbor mortgages and exercises reasonable due diligence to adhere to such a policy and has obtained representations and warranties from the seller or assignor that loans do not violate the minimum standards.
The Identity Theft Enforcement and Restitution Act of 2007, introduced by Senate Judiciary Committee Chairman Patrick Leahy (D-VT) and Ranking Member Arlen Specter (R-PA), would give victims of identity theft the ability to seek restitution for the loss of time and money spent restoring credit and remedying the harms of identity theft. S.2168 would also expand the jurisdiction of federal computer fraud statutes to cover small businesses and corporations and would make it a felony to employ spyware or keyloggers to damage ten or more computers regardless of the aggregate amount of damage caused.
Rep. Earl Pomeroy (D-ND) and Rep. Eric Cantor (R-VA) introduced legislation (H.R.3868) that would delay implementation of the funding requirements of the Pension Protection Act of 2006 for one year to allow the Treasury Department time to provide employers and employees with guidance on the new funding rules.
The Week Ahead
- The House Financial Services Subcommittee on Housing and Community Opportunity will hold a field hearing on the housing needs in Houston on Monday, October 29.
- On Tuesday, October 30, the House Ways and Means Committee will hold a hearing on 401(k) fees.
- The House Judiciary Subcommittee on Commercial and Administrative Law will hold a second hearing entitled “Straightening Out the Mortgage Mess: How Can We Protect Home Ownership and Provide Relief to Consumers in Financial Distress” on Tuesday, October 30.
- Also on Tuesday, October 30, the House Financial Services Subcommittee on Oversight will hold the first in a series of hearings on the role of women and minorities in the financial services industry. Tuesday’s hearing will focus on the role minority-owned financial institutions play in the economy.
- The Senate Banking Subcommittee on Securities, Insurance and Investment will hold a hearing entitled “Climate Disclosure: Measuring Financial Risks and Opportunities” on Wednesday, October 31.
- Also on Wednesday, October 31, the House Financial Services Committee will hold a markup of H.R.3873, H.R.3959, H.R.3965, H.R.3703 and H.R.3956.