Responding to the ongoing subprime mortgage meltdown, the House of Representatives introduced legislation this week that would make it tougher for lenders to steer borrowers into more expensive, high-profit loans and set minimum standards for identifying a borrower's ability to pay.

Mortgage originators who improperly steer borrowers into higher-priced loans would face penalties not to exceed three times the total of the origination fee, plus attorney's fees. Home buyers who believe that the minimum lending standards were not set can file a claim to have the loan rescinded and recover costs.

The bill, H.R. 3915, dubbed The Mortgage Reform and Anti-Predatory Lending Act of 2007, would prohibit prepayment penalties on subprime loans and limit prepayment penalties on prime loans. It also calls for licensing and registration of mortgage originators, including brokers and bank loan officers.

"This bill represents a significant step forward to clean up and prevent a number of the questionable practices that unfortunately took hold in the mortgage lending industry in the last several years," said Rep. Melvin Watt (D-N.C.) in a prepared press release.

Watt, who sponsored the legislation with Brad Miller (D-N.C.) and Barney Frank (D-Mass.), chairman of the House Financial Services Committee, said he hopes the industry will embrace the new changes and let the bill move forward quickly.

The new legislation also attaches limited liability to secondary-market securitizers who package and sell interest in home mortgage loans, the goal of which is to make sure investment banks monitor the quality of the loans they write.