Sen. Dodd to offer mortgage reform Tuesday: staff

WASHINGTON (Reuters) - The chairman of the Senate Banking Committee on Tuesday will introduce legislation to give mortgage borrowers more protection from high-cost and predatory loans, the lawmaker's staff said on Monday.

The legislation sponsored by Christopher Dodd, a Connecticut Democrat, will give victims of mortgage fraud the right to sue lenders, brokers and investors for losses they incur for failed loans, a senior member of the committee staff said.

The legislation will also hold lenders responsible for flawed loans and appraisers responsible for improperly weighing the value of a property.

Lawmakers are not likely to take up Dodd's bill until they return to Washington next year.

The Dodd legislation targets expensive subprime loans traditionally aimed at borrowers with weak credit but that were also popular among borrowers who saw it as an easy way to hop into the market or refinance during the housing boom.

Among other steps, the Dodd legislation would allow the Federal Reserve to regulate more high-cost loans under the Home Ownership and Equity Protection Act.

Dodd, a candidate for the Democratic presidential nomination, has chastised the Fed for loose enforcement of HOEPA during a five-year run-up in home prices that ended in 2005.

The aim of legislation is to align the interest of borrowers and the mortgage lending industry after years of a runaway housing market, the staffer, who asked not to be identified, said.

(Reporting by Patrick Rucker; Editing by Neil Stempleman)