U.S. lawmakers consider the creation of the Financial Products Safety Commission

On Monday Senate lawmakers and White House revealed their intention to present a legislation that will create a Financial Products Safety Commission to approve mortgage products and to support consumers with advice regarding credit cards and retirement accounts.

On Tuesday Senators Charles Schumer, D-NY, and Richard Durbin, D-Ill., planned to discuss their legislation to create the commission at a press conference. According to Delahunt spokesman Rory Sheehan, Republicans Bill Delahunt, D-Mass., and Brad Miller, D-N.C., were to discuss the creation of similar legislation they are introducing in the House. Miller and Delahunt got the support of the House Financial Services Committee Chairman Barney Frank, D-Mass; he has noted that the creation of such a panel is a top priority for the committee.

The panel supposed to provide independent advice to consumers on mortgage products. It would also be charged with approving new financial and home loan products before they can be marketed to consumers. 

Elizabeth Warren, Harvard Law School Professor and chairwoman of the bank bailout congressional oversight panel has been pressing legislators to create such a government commission for a number of years. She considers that consumers have become exposed to complex mortgage products over the past several years, many of which aren't in their best interest. A government commission would provide consumers advice about whether they have the budget for such a mortgage. It’s anticipated that a financial oversight regulator would not reject securitized mortgage products outright.

According to Barney Frank’s words, loan originators have been more likely to agree to offer mortgages to people that have high credit risk if they could package and sell all their risky mortgages to investor groups. Requiring that the original lender keep a percentage of the mortgage would give lenders a greater stimulus not to make loans to people who cannot afford it, he said.