The U.S. House of Representatives currently has pending before it H.R. 3915, the Mortgage Reform and Anti-Predatory Lending Act of 2007. Among other things, this bill would impose liability for violations of the lending standards set out in the bill. Liability on whom, you ask? That is the question addressed in a letter  by Professors Alan White of Valparaiso University, Patricia McCoy of the University of Connecticut (and former Credit Slips guest blogger), Kathleen Engel of the Cleveland-Marshall College of Law (and former Credit Slips guest blogger), and Kurt Eggert of Chapman University. The professors’ letter was written to the three sponsors of the legislation (Reps. Frank, Watt, and Miller).

The professors’ letter points to a potential loophole in the bill’s liability scheme, which would simply allow the loan originators to make sure liability rested with an empty corporate shell. The details are best left to the professors’ letter. As a service to Credit Slips readers and with the professors’ permission, we have posted the letter here. The professors also call for broader liability than the bill currently contemplates, including the possibility of liability resting with the assignees of any mortgages. That is a much more controversial proposition, but it is one that deserves airing.