Mortgage brokers are in Congress' sights

Kevin G. Hall | McClatchy Newspapers

last updated: July 05, 2007 07:05:47 AM

WASHINGTON — Mortgage brokers, who originate up to two-thirds of home loans, have exploited their lack of federal regulation to loosen lending standards in ways that sparked today's high mortgage-default rates among borrowers with weak credit.

Hearings before Congress this year made it clear that mortgage brokers and nonbank lenders took advantage of a regulatory gap to make unsound home loans to people with the weakest credit history, preying especially on minorities and the working poor.

Now Congress must decide how best to bring brokers, who originated about 70 percent of so-called sub-prime loans over the past two years, under some form of federal regulation.