Mortgage crisis: subprime solutions.

• Author: Weigel, David
• Position: Brief article

TO HEAR THE pundits and politicians tell it, the mortgage industry is a monster-sized production of The Sting: Fiendish brokers are giving homeowners loans they can't pay back, while predatory lenders are fleecing poor saps who bought adjustable-rate mortgages. In response, House Financial Services Committee Chairman Barney Frank (D-Mass.) proposed the Mortgage Reform and Anti-Predatory Lending Act of 2007, which would transform the way the mortgage business works.

For the first time, the bill attaches liability to "securitizers" who underwrite mortgages and sell interest in home mortgage loans. It permits judges to rewrite loan terms, ostensibly to help homeowners who have mad a bad deal. Perhaps most importantly, it asks lenders to assess whether a borrower can pay back a loan, and to deny it if they decide he can't. "People should not be lent money beyond what they can be expected to pay back," Frank told reporters.

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These are drastic changes for an industry that boomed before the market started...