House mortgage bill doesn't offer bailout
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Points and fees at issue
One of the most controversial parts of the bill addresses yield spread premiums, which are commissions that lenders make to mortgage brokers. A broker might get a commission of 1 percent of the loan amount; in exchange, the rate is boosted a quarter of a percentage point. The borrower pays the higher rate in lieu of paying an origination fee to the broker.

In early drafts, the bill banned yield spread premiums. Brokers lobbied successfully for a change.

"Most consumers want a zero-point loan," says Marc Savitt, president of The Mortgage Center in Martinsburg, W.Va., and president-elect of the National Association of Mortgage Brokers. "Most people today don't want to pay any points or origination fee. They want it all to be financed."

Under the bill, brokers would be able to collect yield spread premiums for their own compensation, or to raise enough cash to cover some of the borrower's other closing costs, too.

Protect consumers -- from themselves?
The bill's opponents complained that it was too vague, and that it would make a terrible housing market even worse.

Rep. Ed Royce, R-Calif., said the bill has "murky language (that) would invite litigation from every borrower who misses a payment." He added that "the main loser will be the subprime borrower who will pay higher rates -- if he or she can get a loan at all."

Other Republicans warned that it would be foolish for Congress to restrict credit at a time of falling home sales and house prices. "It will deepen the crisis we're facing by limiting peoples' opportunities to refinance or finance their home," Patrick McHenry, R-N.C., said. "It will limit homeownership and limit the opportunities and options that Americans have."

But that argument didn't carry the day, as the majority of the House agreed with Maxine Waters, D-Calif., who said that the foreclosure rate has almost quadrupled in her state in the last year. "Clearly, we need to prevent the now widespread practice of getting people into loans that they can't afford," she said.

The debate over mortgages moves to the Senate, where Christopher Dodd, the Connecticut Democrat who chairs the Banking Committee, has blamed the mortgage meltdown partly on regulators who, he says, haven't exercised their full authority. He said in the spring that he intended to introduce legislation to address predatory lending, but he is not expected to follow through until next year.