Congress is taking aim at mortgage practices
Spurred by the crisis in the home mortgage industry, Congress is readying a slew of proposals aimed at changing some lending practices and helping financially distressed homeowners hang onto their homes.
House Financial Services Committee chairman Barney Frank, Democrat of Newton, is pushing a series of proposals that would subject independent mortgage lenders to the same regulations that apply to banks. Many holders of subprime mortgages — loans offered at higher interest rates because the buyers have credit problems — are now facing foreclosure because they cannot afford the sharp jump in payments de manded by some lenders.
Frank also is pressing the Federal Housing Administration to offer loans to subprime buyers at the same rate given to lower-risk homebuyers. While the legislation won’t eliminate risky loans and subsequent foreclosures, “We’re going to pass a bill that’s going to prevent this from happening in this kind of dimension in the future,” Frank said.
Frank said the changes would strengthen the mortgage market, since the changes would help lenders keep customers, instead of foreclosing on their homes.
Mortgage lenders “want to make money. They don’t want to be owners of vacant property in Cleveland,” Frank said.
The Senate is looking at similar legislation and also is expected to approve $100 million in spending to fund nonprofit groups that help struggling homeowners refinance their mortgages or obtain new ones.
Both the House and the Senate are preparing to hold oversight hearings to determine what led to the mortgage crisis, which has caused financial problems for both lenders and homebuyers.
Instead of helping people own their own homes, some lenders operate “an orchestrated scheme to get as much money out of the homeowner as possible, and then they’re pushed out,” said Bruce Marks, the chief executive of the Neighborhood Assistance Corporation of America, a Boston group that provides low-interest, no-money-down loans to potential homebuyers.
Marks brought about a dozen homeowners to Washington yesterday who said they were lured into risky and expensive loan agreements by Countrywide Financial Corp., which the homeowners said charged higher interest rates than promised, then imposed heavy fees when the buyers had trouble making payments.
“They bullied us,” said Jamie Washington, a Boston woman who said Countrywide jacked up the interest rate on her and her husband’s home loan to more than 11 percent just hours before closing. When the Washingtons failed to persuade the buyers of their previous home to use Countrywide as a mortgage lender, the company threatened to refuse to release the cash for their new house, she said.
In a statement, Countrywide did not address specific complaints from its mortgage holders, but said it is committed to working with the buyers and with Neighborhood Assistance to help people avoid foreclosure.
“Nobody benefits from foreclosure. Nobody!” the statement said. “We are always ready to work with our borrowers,” and have helped 35,000 customers avoid foreclosure this year, the company said.