February 07, 2007

DODD: CREATE, SUSTAIN, PRESERVE AND PROTECT THE AMERICAN DREAM OF HOME OWNERSHIP; STOP ABUSIVE PRACTICES IN THE HOUSING MARKET

Senator Chris Dodd (D-CT), Chairman of the Banking, Housing, and Urban Affairs Committee and a longtime advocate for affordable housing and home ownership, today convened a hearing on predatory lending practices in the mortgage market. At the hearing, entitled “Preserving the American Dream: Predatory Lending Practices and Home Foreclosures,” Dodd heard from two homeowners who were targets of abusive business practices. Delores King, who has owned her home in Chicago for 36 years, may lose her home due to an exotic mortgage she was duped into signing by a telemarket mortgage broker. North Carolina native Amy Womble faces a similar plight after a popup internet advertisement led her to a broker that intentionally misrepresented her income in order to secure a home loan she could not afford. The Committee also heard from the Rev. Jesse Jackson and industry officials. Chairman Dodd focused on several problematic practices within the market: • Vulnerable Targets: Minorities, immigrants, the elderly, and other vulnerable individuals who are frequently the targets for subprime lenders to exercise predatory, abusive and irresponsible lending practices. • The Adjustable Rate Rollercoaster: 2/28 adjustable rate mortgages comprise up to 80% of subprime loans today. These loans are deceiving, as their monthly payments spike up after the initial quoted rate and often force individuals to refinance, generating fees that leave consumers even worse off. • Don’t Blame the Economy: Defaults and foreclosures are rising despite a relatively strong economy. It is time for Congress, the Administration, and the lending industry to face up to the fact that predatory and irresponsible lending practices are creating a crisis for millions of American homeowners. “The system is out of balance,” said Dodd. “There is a chain of responsibility that makes these abusive loans possible. I look forward to working with each link in that chain – the brokers, the bankers, Wall Street, the regulators, the Congress, and the Administration – to help restore this balance for the sake of the homeowners who are being victimized and to make sure that subprime credit can, once again, play a constructive role in the marketplace.”