A bill which is supposed to protect consumers from abuses in the home mortgage industry faces stiff opposition from consumer and legal groups. Consumers would be better off if Congress took no action, they say.

In a letter sent to the Hill, the organizations decry the bill’s insulation of Wall Street and the removal of key state protections that borrowers use to protect their homes.

The lending industry isn't happy with the bill either. The Mortgage Bankers Association (MBA) and the National Association of Mortgage Brokers (NAMB) have criticized the measure for proposing regulations that they say will end up hurting borrowers on the front end by eliminating yield spread premiums that help homeowners avoid higher costs during loan origination.

Consumer advocates say the bill is too slanted towards big-money interests.

“At a moment when the economy is being rocked by the subprime mortgage crisis and when predatory loans are sending millions of Americans into foreclosure, it is shocking that the House of Representatives is protecting Wall Street, instead of the consumers who are at risk of losing their homes,” said Joan Claybrook, president of Public Citizen.

“This bill represents a net loss to consumers because it replaces strong state protections with a weak, untested federal scheme,” said Alys Cohen, staff attorney with the National Consumer Law Center. “We appreciate the authors’ efforts to combat predatory lending, but compromises made to attract wider support make the bill an empty promise.”