Note Reply to my congressman letter; LOL.......... RO/RS=CF
Input sent The Greatest Crime in History (edit; aka... Too Corrupt to Remedy)
financialsense.com
Dear David:
Thank you for sharing your support for federal efforts to curb predatory lending practices and the rising rate of home foreclosures.
The problem of predatory lending has reached near epidemic proportions in recent years, robbing millions of American households of the equity in their homes and undermining the economic vitality of our neighborhoods. In 1994, Congress sought to deal with the problems of predatory home equity lending by passing the Home Owners Equity Protects Act (HOEPA). Not wanting to limit available credit to subprime borrowers, Congress did not restrict high-cost, predatory lending outright nor did it even limit the interest rates and fees a borrower could be charged. Instead, it imposed additional restrictions and disclosure requirements on the highest cost loans to encourage lenders to moderate loan interest rates and fee charges in order to avoid added regulation.
Unfortunately, this response has not been adequate, and as a result in part from predatory lending practices, it is estimated that one out of every five subprime mortgage loans made in recent years will fail. This translates into approximately 2 million families who will lose their homes to foreclosure nationwide. In Kansas, the housing crisis has also had a significant affect. According to the Pew Charitable Trusts, one in 53 homeowners in Kansas is expected to face foreclosure in the next two years as a result of subprime loans. Subprime loans are riskier in and of themselves because the borrower often has weaker credit; however, these foreclosures were, in part, predictable and avoidable through more responsible lending practices. Homeowners who will not lose their homes will still be hurt by the crisis. The Pew Charitable Trusts estimates that 30% of all Kansas homeowners will feel the ripple effects of the housing crisis and property values will drop an average of $1,908. The crisis could also cost the state and local tax base $382 million. I do not support a government bailout for all of these homeowners, particularly for wealthy investors and speculators who borrowed against the equity in their homes, betting on profits from a soaring housing market; however, I do believe we need to make a strong effort to help low-income homeowners who were the victims of predatory lenders refinance in order to stay in their homes, which could have a stabilizing affect on the housing sector.
In order to address this issue, on November 15, 2007, the House approved, with my support, H.R. 3915, the Mortgage Reform and Anti-Predatory Lending Act, by a vote of 291-127. This legislation will help avoid a recurrence of the current situation with rising defaults and foreclosures, especially in the subprime market. Specifically, H.R. 3915 would, among other things:
w Create a licensing system for residential mortgage loan originators. Provides for licensing and registration of all individual mortgage brokers and registration of bank employees that originate mortgages, as well as the establishment of a Nationwide Mortgage Licensing System and Registry.
w Subject all mortgage originators to a federal duty of care. This duty requires the originator to be licensed and registered, present consumers with appropriate mortgage loans for which they have a reasonable ability to repay whose terms represent a tangible benefit for the consumer, and make full disclosures to consumers.
w Prevent mortgage originators from receiving incentive compensation that varies with the terms of the loans. The penalty for violating these provisions is up to three times the broker fees plus costs. States are free to pass more stringent laws; however, these provisions will serve as a federal minimum level of protection.
w Ability to repay/net tangible benefits. Require creditors to make a reasonable determination, at the time the mortgage is consummated, that the consumer has a reasonable ability to repay the loan or for refinancing, the refinanced loan must provide a net tangible benefit to the consumer.
w Safe harbor. Sets forth specific requirements that loans must meet (documented consumer income, no negative amortization, underwriting process based on fully indexed rate, no prepayment penalties etc.) to qualify as part of a "safe harbor" to shield them from liability.
w Extends limited liability to assignees and securitizers of loans. For loans that violate the minimum standards in the bill, a consumer would have an individual cause of action against assignees and securitizers for rescission of the loan and the consumer's cost for rescission.
w Renters. Provides protection for renters when the homes they rent go into foreclosure.
w High-cost mortgages. Expands the scope of and enhances consumer protection for "high cost loans" under the Home Ownership Equity Protection Act (HOEPA).
w Office of Housing Counseling. Establishes within the Department of Housing and Urban Development (HUD) an Office of Housing Counseling that will conduct activities relating to homeownership and rental housing counseling.
While this legislation will be a very important tool in preventing a recurrence of the current situation, additional help is needed for the 2 million homeowners facing foreclosure and to stabilize the housing sector. In response to this issue, on May 8, 2008, the House approved, with my a support, a comprehensive response to the mortgage crisis as a series of amendments to H.R. 3221, the Foreclosure Prevention Act of 2008. The centerpiece of this bipartisan proposal is a voluntary Federal Housing Administration (FHA) program that provides mortgage refinancing assistance to allow families to stay in their homes, protect neighborhoods, and help stabilize the housing market. This new program was coupled with various proposals including tax incentives for first-time homebuyers and loans and grants to states to purchase foreclosed properties to help communities recover from the harm caused by empty homes caught in the foreclosure process.
The program is designed to stem the rise in mortgage foreclosures by allowing FHA to insure and guarantee refinanced mortgages that have been significantly written down by mortgage holders and lenders. The program would permit FHA to provide $300 billion in new guarantees to help refinance at-risk borrowers into viable mortgages. In order to access the program, lenders and mortgage investors must take significant losses by reducing the loan principal amount. In return, the existing lender or mortgage holder would receive a short payment from the proceeds of a new FHA loan if the restructured loan would result in terms that the borrower can reasonably be expected to pay. The existing lender or mortgage holder would have a cash payment and no further credit exposure to the borrower. Additionally, in exchange for an FHA guarantee on the mortgage, borrowers must share any profit from the resale of a refinanced home with the government.
In addition to these provisions, the bill also includes bipartisan provisions previously approved in the House that would update the FHA to help the program serve more subprime borrowers at affordable rates and terms, recapture borrowers that may have received risky loan products in recent years, and offer refinancing opportunities to borrowers currently struggling. In particular, the provisions, which were previously approved in the House as H.R. 1852, the Expanding American Homeownership Act of 2007, would lower down payments, increase loan limits, and direct FHA to provide loans to higher risk (but qualified) borrowers (without authorizing unnecessary fee hikes on those borrowers). Additionally, the package contains provisions to overhaul government-sponsored housing finance enterprises like Fannie Mae and Freddie Mac, which provide liquidity to the mortgage markets by buying loans already made (freeing up money for new mortgages and refinances). Under the House bill these entities could purchase more loans in higher cost areas (lowering interest rates for new homes and refinances in those areas). The bill also includes a package of tax provisions aimed at stimulating the housing sector, including a tax credit for first-time homebuyers and expanded eligibility to allow millions of additional homeowners a chance to deduct their property tax payments from their federal income taxes.
After being approved in the House, the housing package has now been sent to the Senate for consideration. Please be assured that I will keep your views in mind should I be asked to vote on a conference report on this legislation. Thank you again for contacting me. I hope you will continue to keep in touch and please feel free to let me know whenever I may be of assistance.
Very truly yours,
DENNIS MOORE
Member of Congress |
