Wednesday, March 28, 2007

Yeasterday's Hearing:House Subcommittee on Financial Institutions and Consumer Credit:"Subprime and Predatory Mortgage Lending..."

Call it like it is! Yesterday, the House Subcommittee on Financial Institutions and Consumer Credit had a hearing on "Subprime and Predatory Mortgage Lending: New Regulatory Guidance, Current Market Conditions and Effects on Regulated Financial Institutions. Among the
panelists where:

Witness List & Prepared Testimony:
Panel One: The Honorable Sheila Bair, Chairman, Federal Deposit Insurance Corporation • The Honorable John Reich, Director, Office of Thrift Supervision • The Honorable JoAnn Johnson, Chairman, National Credit Union Administration • Mr. E. Wayne Rushton, Senior Deputy Comptroller, Office of the Comptroller of the Currency • Ms. Sandra F. Braunstein, Director, Division of Consumer and Community Affairs, Federal Reserve Board • Mr. Steve Antonakes, Commissioner of Banks, Massachusetts Division of Banks, on behalf of Conference of State Banking Supervisors

Panel Two: Mr. Michael Calhoun, President, Center for Responsible Lending • Mr. John Taylor, President & CEO, National Community Reinvestment Coalition • Mr. Allen Fishbein, Director of Housing and Credit Policy, Consumer Federation of America • Mr. John Robbins, Chairman, Mortgage Bankers Association • Mr. Harry H. Dinham, CMC, President, National Association of Mortgage Brokers • Mr. Alex J. Pollock, Resident Fellow, American Enterprise Institute

Available Member Statements: Congresswoman Brown-Waite, Congressman Gilmor

In her remarks, the Honorable Sheila Bair, Chairman of the FDIC said "...... To be sure, many subprime borrowers have benefited from the expansion of mortgage credit. However, rather than building wealth, many other borrowers are struggling to keep their homes. Many subprime borrowers have little financial cushion in the event of personal emergencies or economic downturns. In addition, many subprime borrowers have been the targets of practices that are highly troubling, if not predatory."
[Text emphasis is mine.]

"Repeat refinancings have taken equity from their homes and adjustable rate features have challenged their ability to continue making payments. In previous years, many of these borrowers could have refinanced their mortgages or sold their homes at a profit to repay their debt in full. Now, as home prices have stagnated or even declined in many areas of the country, more borrowers find themselves trapped in mortgages they cannot afford to pay. Abusive lending practices that result in home ownership that builds debt rather than wealth harm not only individual consumers, but undermine the important societal benefits of home ownership...."

For a full copy of her testimony, which is worthwhile reading,or any of the other witnesses at the hearing, click on her link, above.

I hinted at this last week , only not too many people were willing to say that the real issue are the practices, legal or otherwise, that have brought this about.

In an article in today's Boston Globe on the hearing, columnist Kimberly Blanton writes about one woman who ".. learned at the closing, she told the committee, her mortgage payment would be $1000 higher than she had been promised by the broker, a friend of her boyfriend"..
[Text emphasis is mine.]

Obviously this isn't over. What legislation or regulation should there be to prevent this from reoccuring? What should and can be done for those who went into these loans without fully understanding the consequences? And perhaps lastly, what action might be taken with those who knowingly created this situation?


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