Financial chat rooms and real estate blogs are abuzz about a new bill going after mortgage lenders. While financial institutions have become critical of H.R. 3915, some consumer groups praise the act and call for even tougher reforms.

The bill, titled 'The Mortgage reform and Anti-Predatory Lending Act of 2007,' was introduced Oct. 22 by House Financial Services Committee Chairman Barney Frank, D-Mass., and co-sponsored by Reps. Mel Watt, D-N.C., and Brad Miller, D-N.C. The House Financial Services Committee approved the bill by a 49-19 vote last week. H.R. 3915 goes before the House of Representatives today.

Some of the main provisions of the bill will:

• Require all mortgage loan officers to be licensed and registered
• Require loan officers to be certain that applicants have the financial ability to repay the amount they are borrowing.
• Eliminate penalty charges for borrowers who make their payments early.
• Penalize brokers who push consumers toward high-cost loans.
• Provide foreclosure protections for renters. In case of foreclosure, any successor who takes over the property will have to honor preexisting leases, and tenants without a lease will have at least 90 days before being required to vacate.

In recent reports, Rep. Frank, D-Mass., said the goal of the bill is to 'diminish predatory lending while continuing to support a rigorous mortgage market.' Frank and other supporters say the new legislation will curb the types of abuse in the mortgage industry that has helped fuel the increasing number of foreclosures in this country.

He Said. She Said

The financial industry is not taking warmly to the bill. In an interview with Dow  Jones Newswires last week, Floyd Stoner, an executive director at the American Bankers Association, says his group had 'serious concerns' with certain parts of H.R. 3915.

'Some of our major concerns relate to increased regulatory burden for federally insured depository institutions, lack of a national standard and the impact on a bank's ability to provide products and services - all of which would increase costs and decrease choices for consumers,' Stoner said in his interview.

Forbes.com reports that the 'Mortgage Bankers Association (MBA) and the Financial Services Roundtable have sent letters to Frank opposing several major provisions of the bill.

Advocates of the bill, however, argue that the proposed legislation is not a cure-all, but it targets two highly troubling aspects of the current system. The bill will require lenders to verify borrowers' abilities to repay the loans or, in the case of refinancing, to verify that the new loans are a better deal than those the borrowers already have. And the legislation removes the warped incentives, prohibiting mortgage brokers' taking higher compensation for steering borrowers to more expensive loans.

In a statement released on their Website, officials from the National Community Reinvestment Coalition said they would've liked to have seen harsher penalties against predatory lenders in H.R. 3915, but see the bill as a step in the right direction in protecting consumers' rights.

What do you think? Will this anti-predatory lending act do enough to protect consumers, especially homebuyers with poor credit? Or is the bill placing too much restraint on mortgage brokers?