April 25, 2007

Chairman Dodd, Banking Committee Democrats Urge Bernanke to Follow Law to Help Curb Predatory Lending Practices in Subprime Market

Democrats on the Senate Committee on Banking, Housing and Urban Affairs joined Chairman Chris Dodd (D-CT) today in sending a letter urging Federal Reserve Board Chairman Ben Bernanke to exercise its obligations under the Home Ownership and Equity Protection Act (HOEPA) of 1994 to issue regulations that address predatory lending practices in the subprime mortgage market. In the letter, Committee members recommend the Fed take the following actions to fully implement its authority under the law:
  • Require all mortgage originators to evaluate a borrower’s ability to repay prior to making a mortgage loan.
  • Designate that the failure to escrow taxes and insurance as an unfair and deceptive practice.
  • Restrict the use of low- and no-documentation loans.
“While this is not a comprehensive list, quick action on these items by the Federal Reserve Board under its HOEPA authority would be extremely helpful in extending important consumer protections to homeowners and buyers. Moreover, it would do so in a comprehensive way by requiring that all lenders operate under the same rules,” the letter states. Chairman Dodd has convened two hearings on the subprime mortgage crisis, and recently convened a Homeownership Preservation Summit of leaders of stakeholders in the market.
Click here for the full text of the letter.