February 14, 2007

DODD CALLS REGULATORS’ RESPONSE TO PREDATORY LENDING “INADEQUATE”

Chairman Chris Dodd (D-CT) today expressed dissatisfaction with the response he received from federal regulators to a letter that he and other members of the Banking Committee sent in December. Sen. Dodd raised the issue directly with Federal Reserve Chairman Ben Bernanke during a hearing today. Sen. Dodd termed the response by Chairman Bernanke and fellow regulators to predatory lending “inadequate.” The letter urged the federal financial regulatory agencies to adopt the same guidelines that are applied for exotic mortgages in the subprime market to higher cost subprime adjustable rate mortgages (ARMs), such as 2/28 ARMs. 2/28 ARMs, which comprise up to 80% of the subprime market, put consumers at risk for facing sharp increases in monthly payments for which they are not prepared and which they cannot afford. “Owning a home is one of the wisest investments Americans can make, and one of the fundamental and most fiscally responsible ways to accumulate wealth,” said Dodd. “Home ownership fosters both financial mobility and economic security. We must encourage this goal, yet some practices in the subprime market seem to be doing just the opposite. “There is simply no justification for offering vulnerable borrowers fewer protections than those offered to borrowers in the prime market. In addition, data has shown that black and Hispanic families are disproportionately borrowing in the high cost subprime market. In order to achieve consistency and fairness, we urge the regulators to move quickly on this issue.” Chairman Dodd, concerned by the rising rates in defaults and home foreclosures, has brought attention to predatory lending practices in the housing market and how these practices undermine Americans’ efforts to build wealth and achieve greater economic security and prosperity.