September 05, 2007

Chairman Dodd Announces Legislation to Protect American Homeownership

Dodd’s bill will reform subprime lending practices, strengthen borrower protections, restore confidence in markets

Senator Chris Dodd (D-CT), Chairman of the Senate Committee on Banking, Housing, and Urban Affairs, today announced his intention to introduce legislation to reform mortgage lending practices that have created problems for homeowners and investors in the subprime market.
    “Let me be clear: affordable home loans are a good thing; predatory lending is not. Predatory lending needs to be stopped, which is why I intend to introduce legislation that will put an end to the practices that have forced thousands of Americans into foreclosure and put thousands more in danger of losing their homes,” said Dodd. “My bill will end prepayment penalties – which only exist in the subprime market, and which penalize homeowners for trying to do the right thing by refinancing their mortgage. It will prohibit brokers and lenders from “steering” homebuyers to a more costly loan. And it will make brokers responsible to the people who pay them – and ban them from acting as free agents who play lenders and borrowers off against each other. Most importantly, my bill will help keep Americans in their homes while also helping to restore public confidence in our mortgage and capital markets.” “It has long been clear to the civil rights community that America has a separate and unequal lending system and that African-American, Latino and other minority consumers disproportionately secure credit from an unscrupulous and unregulated lending market,” said Wade Henderson, the President of the Leadership Conference on Civil Rights. “Senator Dodd’s bill will help guarantee responsible subprime lending opportunities for people who might otherwise never own a home.” “There is an urgent need to address the epidemic of foreclosures in the subprime market today, and we applaud Senator Dodd’s leadership in addressing the reckless underwriting and dangerous products that have put the homes of over 2.2 million families at risk of foreclosure,” said Martin Eakes, CEO of the Center for Responsible Lending. “Senator Dodd’s proposed legislation would go a long way toward ensuring that borrowers have a chance to build wealth through long-term, affordable, and sustainable homeownership.” “Senator Dodd’s initial plan recognizes that current federal protections against predatory lending are dangerously out of date, and we look forward to seeing the final language in his bill,” said David Sloane, Director of Government Relations and Advocacy at AARP. “The cracks in the system threaten the financial security of every individual who understands the important role of home ownership in building a stable and prosperous future. AARP appreciates Senator Dodd's leadership on this issue and believes that a comprehensive approach to the problem, including requiring an accurate assessment of the borrower's ability to repay over the life of the loan, is necessary.” “Senator Dodd has long been a champion of the rights of all Americans to pursue the American dream. As such, we again commend him and are delighted with the courage and leadership he is demonstrating by developing aggressive legislation to address the current predatory lending scourge. This new initiative by Senate Banking Committee Chairman Dodd gives us hope that effective federal action may become a reality in the very near future” said Hilary O. Shelton, the Director of the NAACP Washington Bureau. “We look forward to working with Chairman Dodd over the course of the next few months to ensure that the unscrupulous lenders who have disproportionately targeted the African American community will be curbed.” “ACORN applauds Senator Dodd's announcement today that he will be introducing strong legislation to curb predatory lending,” said Maude Hurd, National President of ACORN. “We are especially pleased to hear that the legislation will address not only the worst current practices, such as imposing prepayment penalties on subprime loans and steering borrowers to more expensive loans, but will also broadly cover future predatory practices. In particular, by requiring lenders to abide by a duty of good faith and fair dealing and mortgage brokers to act in the best interest of the borrower, this legislation will protect future consumers from new and emerging predatory practices." “We are heartened that Senator Dodd is using his leadership position to provide new protections to American homeowners from predatory mortgage lending,” said Margot Saunders of the National Consumer Law Center. “The centerpiece of Senator Dodd's bill will establish in federal law the principle that all lenders have an obligation of good faith and fair dealing when making a home loan. This approach will help restore a long-awaited measure of fairness to the mortgage market.” “Reckless lending has unleashed a torrent of home foreclosures and destabilized financial markets,” said Allen Fishbein, the Director of Housing and Credit Policy for the Consumer Federation of America. “There should be no denying that the lack of adequate consumer protection helped cause the current crisis. We applaud Chairman Dodd for his leadership by announcing plans to offer legislation calculated to prevent future abuses and featuring important new safeguards for consumers seeking mortgage credit.” “We support Senator Dodd’s efforts to improve the regulation of the housing market to ensure that working families are able to secure and sustain homeownership,” says John Taylor, President & CEO of the National Community Reinvestment Coalition (NCRC). “The need for national legislation is imperative given the millions of families that face the possible loss of their homes.”
This legislation is part of Chairman Dodd's comprehensive strategy to protect, preserve and promote the American dream of homeownership. Since becoming Chairman of the Senate Banking Committee, Dodd has made American homeownership a top priority, convening two hearings to examine the problems in the subprime mortgage market and successfully persuading the Federal Reserve to meet its obligations under the Homeownership and Equity Protection Act (HOEPA) to protect borrowers from unfair, deceptive, and misleading actions by mortgage industry participants against homebuyers. Earlier this year, Chairman Dodd brought together lenders, servicers, and representatives from Fannie Mae and Freddie Mac at the Homeownership Preservation Summit, where the leaders in the industry committed to make their best efforts to help homeowners stay in their homes. Dodd has backed at least $100 million in federal funding to help homeowners who can qualify to refinance to affordable mortgages, and has also advocated that the Administration raise the portfolio caps for Freddie Mac and Fannie Mae in a manner that is safe, sound, and targeted to consumer-friendly mortgages.
A Summary of The Homeownership Preservation and Protection Act is available here.