State and Locals Seek Legislative and Regulatory Relief for Subprime Borrowers
Legislators in more than 30 states have introduced close to 100 bills drafted to decrease predatory loans and foreclosures. Most recently, North Carolina’s Governor Michael Easley received national attention by signing legislation that would limit the ability of mortgage brokers to charge customers above-market rates and prepayment penalties. The law would also protect subprime borrowers from highly risky adjustable-rate mortgages.Other states are actively pursuing options to reduce homeowner concern. Among these:
- Maine, Minnesota and Ohio have passed measures tightening restrictions on subprime lending.
- Illinois, New York and Massachusetts have formed task forces with representatives of the mortgage industry to rework problem loans.
- Minnesota is acquiring foreclosed properties to resell to low income families.
- Maryland, Massachusetts, New Jersey, New York, Ohio and Pennsylvania have rolled out mortgage programs intended to refinance loans by homeowners at risk, using the proceeds of state bond issues and money from federal lending agencies.
- Several states are considering laws and regulations to make mortgage brokers responsible for allowing borrowers to take on debts irresponsibly.
- Ohio regulators agreed to tighten the underwriting standards on adjustable rate, directing lenders in the subprime market to verify a borrower's income, inform borrowers of prepayment charges and stop underwriting loans at the initial teaser rate. The Ohio Foreclosure Prevention Task Force has called for $50 million in grants to help cities redevelop neighborhoods hardest hit by foreclosures and blighted by abandoned houses.
Additional action is expected in the coming weeks as state legislators return to work this fall.
For more information, contact Beth Ambrose at 800-368-5242 x8253.
Mayors Press Federal Reserve to Take Action on Subprime Mortgage Foreclosures
During their annual meeting in
Los Angeles on
June 22-26, the United States Conference of Mayors called on the Federal Reserve Board to use its authority under the Home Ownership and Equity Protection Act (HOEPA) to protect home owners from abusive practices which often result in mortgage foreclosures.
The mayors are asking the Fed to:
- Apply strict limits to prepayment penalties, which should not apply after the expiration of teaser rates in ARM prime and subprime loans.
- Require escrows for all loans.
- Establish clear protections and procedures for presentation of income support documentation.
- Require underwriting at the maximum possible rate or rates above the fully indexed rate to create protection from unaffordable loans.
It is estimated that $1.4 trillion in adjustable rate mortgages (ARMs) will reset and climb higher at the end of this year and in 2008, affecting close to two million families that will face financial problems and/or foreclosure as a result of that.
The U.S. Conference of Mayors is the official nonpartisan organization of cities with populations of 30,000 or more. There are 1,139 such cities in the country today.
For more information, contact Carlos Gutierrez at 800-368-5242 x8242.
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