Law stops mortgage kickbacks and liar loans

WASHINGTON, May 12 (Reuters) – The U.S. Senate on Wednesday voted to end mortgage kickbacks and so-called “liar loans,” two lending practices that played a role in the meltdown of the subprime mortgage market.

By a 63-36 vote, the Senate adopted a measure that would prohibit mortgage lenders from offering incentives to brokers who steer customers into more-expensive loans.

The amendment, which was added to a sweeping rewrite of financial regulations, also would end “liar loans” by requiring lenders to verify that borrowers have enough income to repay their mortgages.