Representative Richard Baker (R-LA), chairman of the House Financial Services Capital Markets Subcommittee, introduced the "Mortgage Market Protection Act," H.R. 4719, on June 25, 2004. The bill responded to concerns raised during a recent hearing of the House Financial Services Committee involving the potential liability facing financial institutions active in the secondary market. Certain state legislators, seeking to prevent abusive lending practices, have sought to assign liability on those who purchase the loans, preventing rating agencies from rating certain mortgage-backed securities. Baker's bill would amend the Truth in Lending Act by limiting the liability and damages for an assignee in a credit transaction.

Baker contends that this legislation will establish a "reasonable man" standard when dealing with the discovery of a loan in a portfolio that may be considered questionable. "If you use common sense in reviewing what you're buying, then you later discover there are one or two [loans] that doesn't conform, you should be given some period in time in which to take corrective action" said Baker.

AFSA is working with Baker's senior staff to move this legislation forward and would welcome comments from its members on HR 4719. Please send them to Bill Himpler, Vice President of Government Affairs, at bhimpler@afsamail.org.

Read the text of HR 4719.