California response to foreclosure crisis weak
Consumers and market deserve strong action, say consumer groups
Oakland, Calif.-Aug. 21, 2007-A coalition of California consumer
organizations demanded stronger, swifter action on the part of the
California legislature in response to the subprime mortgage crisis at a
press conference in Sacramento today as well as in testimony before the
Senate Banking Committee.
The organizations, including California ACORN, the California
Reinvestment Coalition (CRC), the Center for Responsible Lending (CRL),
Consumer Federation of California (CFC)
and Consumers Union recommended a number of policy changes that would
both assist current borrowers in crisis and protect future subprime
"Two years ago, I had an affordable mortgage and owed only $9,000 on my home," said Dorothy Hicks, an Oakland resident."After two refinances and thanks to details I was never told, I have no business and may soon have no home."
"I thought that there were laws that kept companies from taking
advantage of people, but I found out the hard way that whatever laws we
have are not enough."
Ms. Hicks is not alone. California is projected to see nearly half a
million foreclosures among subprime loans originated between 1998-2006.Yet,
California has taken no action to address the subprime mortgage
collapse and the irresponsible lending practices that are at its root.Ohio,
Maine, Minnesota and, just last week, North Carolina, have already
implemented strong legislation to curb the risky practices that
permeate the subprime market.Numerous states are
exploring ways to help borrowers facing foreclosure, including
Colorado, New York, Massachusetts and Ohio, which have all created
funding pools to help borrowers refinance into long-term affordable
"With record levels of foreclosures and more coming, California’s
homeowners, housing markets and economic growth are all at risk," said
Center for Responsible Lending California office director Paul Leonard.
"The state should lead efforts to reduce foreclosures, help borrowers
and reduce risks for new subprime loans."
Among the range of today’s recommendations aimed at helping current subprime borrowers were:
- Emergency funding for foreclosure prevention counseling and legal assistance;
- Support for a lender-initiated moratorium on foreclosures;
- Aggressive state monitoring of lender loan modification efforts to keep borrowers in their homes; and
- State-financed mortgage products to help at-risk borrowers refinance into long-term affordable mortgages
The coalition also suggested a number of legislative changes to help
protect subprime borrowers taking out loans today and in the future.These included:
- Banning subprime prepayment penalties;
- Establishing a legislative ability-to-repay standard, with income verification and impound accounts for taxes and insurance; and
- Cracking down on broker abuses by establishing stronger lender liability for broker actions.