Progressive Voices

Everyone knows that lawmaking in Congress can be a crazy and confusing process. That's part of the genius of the American system: It takes a lot of hard work and compromise to get a majority of the 530-plus lawmakers to agree to just about anything.

When it comes to vitally important and extremely complex legislation like mortgage lending reform — an area featuring dozens of high-powered interest groups and in which millions of individual and corporate livelihoods are at stake — it's a wonder that anything coherent even gets introduced, much less passed into law.

Still, there's something especially bizarre and troubling about the current debate in the House Financial Services Committee between three excellent and progressive congressmen, Barney Frank of Massachusetts and North Carolina's own Brad Miller and Mel Watt.

Here's the situation:

Frank, who chairs the committee, is working to pass a reform bill inspired by the groundbreaking 1999 North Carolina law that targeted predatory mortgage loans. Not surprisingly, Miller and Watt, who have both long championed the reform of mortgage lending laws, have joined their chairman in the effort. So far so good.

Now, here's where things get complicated.

Lending industry lobbyists have, of course, come out in force to oppose the bill. Despite the economic meltdown that their practices help bring about, the industry remains defiantly resistant to even modest improvements in consumer protection regulation.

As a committee chairman concerned with getting something done, Frank has taken a pragmatic stance (many would say overly pragmatic) in response to the opposition from a powerful industry — one that has even more friends in the clubby U.S. Senate.

In exchange for some modest new consumer protections for mortgages that fall outside the standard, fixed-rate, "prime" loan category, Frank has apparently agreed to two things strongly opposed by consumer advocates.

First, the bill would protect the Wall Street wizards who spurred the housing market bubble and collapse in the first place by financing and buying up the wild and risky loans that swept the country. It does this by insulating these loan "holders" (also known as "assignees") from responsibility or liability for the illegal loans they made possible.

So, if you're a consumer who got ripped off, it's tough luck. You'll have no right to recover from the big money people behind the whole scheme.

The second huge problem with the bill is that it would "pre-empt" (that is, wipe out) stronger state laws from places like, you guessed it, North Carolina. This means that our law, which allows consumers to sue the Wall Street types who hold their loans and includes other stronger protections, would be no more.

Got that? The very law that helped inspire the congressional proposal to begin with would be hugely weakened by the law it inspired! It's enough to make your head spin.

Such a situation clearly places Reps. Miller and Watt in a tough spot. Both of them are good and smart lawyers who have been apprised of and grasp the problems with the bill that features their names. But to oppose the bill would mean to pick a big and difficult fight with their committee chairman — a powerful congressman who generally wants to do the right thing, and who in this case appears simply to have made a poor political judgment.

What to do?

At this point, both Miller and Watt say they want to strengthen the bill by addressing the offensive provisions. Whether they can pull it off is another matter. The forces arrayed against them are powerful and time is short. The Financial Services Committee is expected to take action on the proposal this week.

In response to the situation, nonprofit consumer advocacy groups are doing all within their power to lobby the committee (Frank, Miller and Watt, included) to address the two big shortcomings in the bill.

Here in North Carolina, advocates are calling on all of the state's congressional delegation to weigh in to protect our state's outstanding law. They've been joined by Attorney General Roy Cooper, who was one of the law's chief architects.

Let's hope that they're also joined by thousands of average North Carolinians who let them know that they're 100 percent behind Watt and Miller's efforts to strengthen the bill and save North Carolina's outstanding law. The process and politics in Washington may be crazy and complicated, but nothing stiffens the resolve of lawmakers fighting powerful vested interests like the knowledge that constituents have their back.

Al Ripley and Carlene McNulty are attorneys who specialize in consumer protection at the N.C. Justice Center.

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This entry was posted on Monday, April 27th, 2009 at 8:45 am and is filed under Progressive Voices. You can follow any responses to this entry through the RSS 2.0 feed.