What: All Issues : Making Government Work for Everyone, Not Just the Rich or Powerful : Consumer Protection : S 3217. (Overhaul of financial regulations) Corker of Tennessee amendment that would require federal banking regulators to create minimum standards for underwriting loans, including methods for determining someone’s financial ability to repay the loan/On agreeing to the amendment
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S 3217. (Overhaul of financial regulations) Corker of Tennessee amendment that would require federal banking regulators to create minimum standards for underwriting loans, including methods for determining someone’s financial ability to repay the loan/On agreeing to the amendment
senate Roll Call 142     May 12, 2010
Y = Conservative
N = Progressive
Winning Side:
Progressive

This vote was on an amendment by Bob Corker, R-Tenn., that would have required federal banking regulators to create minimum standards for underwriting loans, including methods to ensure that people have the financial ability to repay them.  Additionally it would have required a 5 percent minimum down payment for home purchases, and private mortgage insurance for certain kinds of loans.   The amendment was offered to a bill that aims to close gaps in financial regulations, strengthen oversight of consumer lending and more closely oversee certain kinds of exotic financial investments.

Corker said his amendment would restore the nation’s focus on the core issues that contributed to the financial meltdown:  so-called “liar loans” that formed the basis of the subprime mortgage crisis, where people took out loans they had no ability to pay, mostly because their incomes weren’t verified properly.

“Believe it or not, it asks that there be fully documented income, including credit history and employment history. Gosh, what a big issue that would be, just to know someone had the ability to pay back the loan,” Corker said.  “Then it requires a method for determining the borrower’s ability to repay, including consideration of their debt-to-income ratio, which is very important. So this would be done by banking regulators. It does not apply to VA or rural housing administration mortgages. It does give an exemption for organizations such as Habitat and Enterprise and others that allow homeowners to use sweat equity to actually build up some equity in a home.”

Corker said his approach is superior to one taken by an earlier amendment offered by Jeff Merkley, D-Ore (see vote 141).  Corker’s amendment sought to achieve much of the same goals as Merkley’s, but would have put the authority to implement these new regulations within the jurisdiction of current banking regulators instead of the new consumer financial protection body the underlying bill would create. 

“While I respect Senators on the other side of the aisle, Senators Merkley and Klobuchar,  … I want to say to people in this body that while that is a good-intentioned amendment, what it does is build on the construct of the Dodd bill where, in essence, we are giving to this new consumer protection agency the ability to do loan underwriting. I think that is a dangerous path for our country to go down.”

By a vote of 42-57, the amendment was rejected.  All but two Republicans present voted for the amendment.  All but three Democrats present voted against the amendment.  The end result is that the measure went forward with language that would have required the creation of minimum loan underwriting standards, including income verification and other items, as well as creating a minimum 5 percent down payment requirement for new home purchases.  The authority to create those underwriting standards was moved to the new consumer financial protection authority as opposed to being set by banking regulators.

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