Rep. Lacy Clay, D-Mo., has introduced a predatory lending bill in hopes of jump-starting the legislative process and enabling Congress to pass a bill next year that is workable for lenders and protects consumers from loan flipping and other abusive lending practices.House members have been working on predatory lending legislation for four years without being able to bridge the gap between an industry-backed bill and one supported by consumer advocates. The legislation has become "bogged down," according to an aide to Rep. Clay. So Rep. Clay has introduced a bill to "jump-start" the process and "raise the bar," the staffer said. Under the Clay bill (H.R. 4471), lenders that charge points and fees that exceed 5% of the loan amount would not be able to require mandatory arbitration, and investors would be liable for violations under an assignee liability provision. However, indirect compensation paid to mortgage brokers (generally known as yield-spread premiums) of up to 2% of the loan amount would be exempt from the 5% points/fees test. The Clay bill also restricts prepayment penalties to 2.5% of the loan amount on all home loans and prohibits all lenders from steering customers into higher-cost subprime loans. "It's not going to make the industry totally happy or advocates totally happy," said Wright Andrews, a lobbyist for a subprime lending group. "But it seems to walk down the middle," he said.

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