Sen. Hillary Clinton (D-NY) is proposing a plan to preserve homeownership that would crack down on unscrupulous brokers, curb mortgage lending abuses, assist families facing foreclosure, and expand affordable housing options. She made her announcement while campaigning in Derry, N.H.
"Today, we have a choice. We can look at the statistics, wring our hands, and continue to do nothing, or we can do what America has always done in times of difficulty: acknowledge that we face a real challenge, and confront it head-on with real solutions," said Clinton. "I think the choice is clear. I think we need to act now, with smart, practical solutions to strengthen our housing and mortgage markets."
Clinton's announcement comes on the same day that American Home Mortgage Investment Corp. declared bankruptcy. American Home Mortgage, one of the top 10 mortgage companies in 2006, is not the only mortgage company suffering; Atlanta-based HomeBanc Corp. announced Tuesday that it intends to exit the mortgage loan origination business (Countrywide Financial Corp. will acquire certain assets related to HomeBanc's retail loan origination operations).
"In light of the extraordinary difficulties that HomeBanc continues to face in the mortgage loan origination market, we feel that it is in the best interests of the company to exit this business so that we can focus on preserving the value of our investment portfolio assets and loan servicing operations," Kevin D. Race, HomeBanc's CEO said in a company release.
In addition, Houston-based Aegis Mortgage Corp. announced Monday that it will not be taking any more new loans.
With home foreclosures up 56 percent in the first half of 2007 (according to a recent RealtyTrac report), Clinton has definitely found an election issue many Americans can relate to.
"We need to put an end to fly-by-night mortgage brokers peddling loans to unqualified applicants based on inflated appraisals. We need to help those facing the pain of foreclosure. We need to secure the marketplace and put reforms in place right now," said Clinton.
Clinton's plan includes:
- Requiring mortgage brokers to disclose to borrowers that their compensation rises when borrowers' mortgage rates and mortgage fees are high;
- Working with states to develop strong licensing standards and require federal registration for mortgage brokers;
- Eliminating prepayment penalties on mortgage products;
- Requiring mortgage lenders to include the cost of taxes and insurance in the underwriting assessment of higher-risk mortgages;
- Establishing a $1 billion fund to assist state programs that help at-risk borrowers avoid foreclosure;
- Expanding Fannie Mae's and Freddie Mac's foreclosure prevention efforts;
- Establish a $1 billion fund to provide federal support to housing trust funds established by state, county, and municipal governments.
Clinton is not the only politician to introduce a plan to protect home buyers from predatory lending practices. In mid-July, Reps. Spencer Bachus (R-Ala.), Paul Gillmor (R-Ohio), and Deborah Pryce (R-Ohio) introduced subprime lending legislation aimed at protecting consumers.
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