From MarketWatch:
Subprime market needs more rules, advocates say
Greater regulation is needed to ensure that America’s most vulnerable home-loan borrowers are protected from unscrupulous lenders, as well as confusing and pricey mortgages, consumer advocates said Tuesday.
“We have a regulatory failure here on a level that is frankly putting the economy at risk,” said David Berenbaum, executive vice president of the National Community Reinvestment Coalition, at a Senate banking subcommittee hearing.
Consumer groups at the hearing spoke in favor of the proposed Borrower’s Protection Act of 2007. The act would increase protections for subprime borrowers typically those with lower-incomes or blemished credit histories with new regulations and requirements for various mortgage originators.
“It’s clear that the subprime market has been the Wild West of the mortgage industry for far too long,” said Sen. Charles Schumer, D-N.Y., a co-sponsor of the proposed legislation.
The bill would create more responsibility for home mortgage brokers, prohibit originators from steering consumers to loans that are not “reasonably advantageous” and make lenders liable for mortgage brokers’ omissions in connection with more-expensive loans that could end up in higher fees, among other acts.
Subprime borrowers have been steered toward loans that are needlessly expensive so that brokers and others can reap higher profits, critics claim. In particular, adjustable rate mortgages can end up costing much more than borrowers anticipate when the loans reset from an initial “teaser” rate.
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The Borrower’s Protection Act would also:Require mortgage originators to verify borrowers’ reasonable ability to pay the principal and interest, real estate taxes, and other fees associated with a loan.
Prohibit mortgage originators from entering into a loan when the originator has reason to believe that the appraiser of the property securing the loan failed to act in good faith and fair dealing in its appraisal.
Prohibit a mortgage originator from seeking to influence an appraiser or encouraging a targeted value.
From the National Association of Realtors:
Realtors® Call For Responsible Lending Policies With Increased Consumer Protection
The National Association of Realtors® testified today that abusive lending problems are national problems and require solutions that afford the homebuyer greater protection. NAR noted that irresponsible and abusive lending, and “problematic” loans, are disastrous not only to borrowers and their family but also to the community, and to the economic strength of those and surrounding communities.
“As we sit here today, my home state of Michigan has one of the highest foreclosure rates in America. I can tell you from personal experience that when families lose homes to foreclosure, our communities, the housing market and our local and national economies all suffer,” Pat V. Combs, NAR president, said before the Senate Subcommittee on Housing, Transportation and Community Development.
“Realtors® support making fair and affordable mortgage products available for those with less than perfect credit. At the same time, we believe such loans should only be made when it is clear that the borrower can afford to repay it. Responsible lending principles, such as those developed by NAR, need to be implemented to curb predatory lending and to rein in abusive lenders. NAR will continue to work with Congress to address the problems created by irresponsible lending practices,” said Combs.
NAR’s responsible lending policy calls for stronger underwriting standards, for all mortgage originators to act in “good faith and with fair dealings,” and provide flexibility for unique life circumstances. NAR also pledged support for legislative, regulatory and private-sector foreclosure avoidance and mitigation efforts, and increased funding for programs that provide financial assistance, counseling and consumer education to help borrowers make good decisions.
Fresh sheets!
Regulation now ? – give us a break. The republican govt did nothing but deliberately encourage the housing scam to fill the pockets of the rich. Now – blowback time. The Wall St Hedge funds which knowingly invested in such scams will be hoping for a “Tax-payers” funded S&L-type bailout. Oh ! the criminality of the rich ! Someone said that ‘a sucker was born every minute’. When are we going to wake up to the fact that the colour of money is green ?