Language in 'Base Text' of Reform Bill Trouble for Lenders?

Language in the "base text" document of the regulatory reform bill could allow residential borrowers to sue their lender—without a statute of limitations—if the mortgage banker violates the anti-steering provisions of the law. According to an analysis of the base text conducted by K&L Gates, "in the case of judicial or nonjudicial foreclosure or any other action to collect on a loan, it appears that a consumer has a perpetual federal right to assert such a violation by a creditor as a matter of defense by recoupment or set off in an amount equal to the monetary damages that could be asserted against the original creditor." The base text is an amalgamation of the House and Senate versions of the bill. The law firm notes that several provisions from the House bill pertaining to residential mortgage lending that were not in the Senate Bill are included in the initial base document. The anti-steering language is designed to prevent lenders from pushing borrowers into certain loans—regardless of their ability to repay—because the loan officer might receive higher compensation for delivering such a loan. The law firm is telling clients, "There is a lot to be digested in the base document, but it is important to stress that it is the starting point for negotiations among the conferees."