Recently the House passed a bill that was designed to protect borrowers from “abusive” home loans. That means if borrowers are not able to realistically pay back the loan, lenders would not be able to make the loan in the first place. The bill also sets up a system of uniform licensing for mortgage brokers, and it also stipulates that the Wall Street banks who are packaging mortgage securities as investments would be liable for breaches of the lending laws.

Those who oppose the bill says that it could generate a flood of lawsuits. Mortgage lenders are scrambling anyway — going bankrupt, selling their assets, and laying of thousands of employees. They claim they are interested and will to work with the borrowers so that they can meet their loan obligations. Are they in a position to help? A recent survey shows that these adjustments have only taken place for about 1% of mortgage holders this year; in the meantime, around 2.2 million families are facing the very real prospect of foreclosure.

If subprime lenders would contact borrowers in order to reset interest rates, they could help these people avoid foreclosure — and at the same time reduce some of their own costs on defaulted loans. Because the problem is so large (up to 15% of the loans handled by some servicers) it seems that these resets might be in the lender’s best interest, whether this sort of action is covered under a bill or not. Some investors have suggested that credit counseling agencies or government assistance programs be called in to assist borrowers; at any rate, the bill provides a good first step in helping with the current mortgage crisis.