Consumer/civil liberties response to housing bill

WASHINGTON, DC – October 24, 2007 - A coalition of consumer groups who work on housing and predatory lending issues released a statement today in reaction to legislation* introduced by Reps. Brad Miller (D-NC), Mel Watt (D-NC) and Barney Frank (D-MA) to combat abuses in the mortgage lending market and to provide basic protections to mortgage consumers and investors.

We commend Chairman Frank and Representatives Watt and Miller for taking the lead in addressing the underlying problems that have led to the escalating foreclosure crisis in this country. Banning prepayment penalties in the subprime mortgage market, requiring lenders to assess each borrower’s ability to repay, and eliminating the bonuses lenders now pay to brokers to put people in more expensive loans than those for which they qualify would go a long way to protecting families from the deceptive and abusive loans that ultimately lead to a decline in home ownership.

We are glad the legislation would set minimum federal lending standards while preserving the rights of states to take additional steps to protect their citizens from what are now widespread abusive lending practices. However, we worry the bill lacks sufficient legal recourse for consumers who are taken advantage of by unscrupulous or reckless lenders, brokers, and investors. The limited remedies in the bill do not give Wall Street investors who buy mortgages and package them as securities adequate incentives to police themselves. Wall Street contributed to the problem, with its appetite for riskier loans, so it must have its fair share of accountability. Further, families need to be able to protect themselves from illegal lending practices regardless of who owns their home loan at a given time.

We look forward to working with Members throughout the legislative process to create much needed safeguards that will lead to sustainable homeownership and an economy that works for all.

Contacts for the organizations are:

  • AARP – Susanna Montezemolo 202-434-3807
  • American Federation of Labor and Congress of Industrial Organizations - Greg Jefferson 202-637-5087
  • Black Leadership Forum – Gary L. Flowers 202-689-1965
  • Center for Responsible Lending – Kathleen Day 202-349-1871 or Sharon Reuss 919-313-8527
  • Community Development Financial Institution Coalition 703- 294-6970
  • Consumer Action – Linda Sherry 202-544-3088
  • Consumer Federation of America – Allen Fishbein 202-387-6121
  • Consumers Union – Jeannine Kenney 202-238-9249
  • National Association of Consumer Advocates – Ira Rheingold 202- 452-989
  • National Consumer Law Center, on behalf of its low-income clients - Alys Cohen 202-452-6252 x102
  • Opportunity Finance Network – Jennifer Vasiloff 703-967-1338
  • U.S. Public Interest Research Group – Ed Mierzwinski 202-546-9707 x314

*The bill, titled “The Mortgage Reform and Anti-Predatory Lending Act of 2007,” would reform mortgage practices in three areas. First, the bill will establish a federal duty of care, prohibit steering and call for licensing and registration of mortgage originators, including brokers and bank loan officers. Second, the new legislation will set a minimum standard for all mortgages to ensure that borrowers have a reasonable ability to repay. Third, the legislation attaches limited liability to secondary market securitizers who package and sell interest in home mortgage loans originated without regard to these standards. (Under the bill, individual investors in these securities would not be liable.) The bill expands consumer protections for “high-cost loans” under the Home Ownership and Equity Protection Act (HOEPA) and includes protections for renters of foreclosed homes.

 
 

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