Merkley And Dodd: New Consumer Protections Vital For Growing The EconomyOctober 12, 2009
Portland, OR – Abusive financial practices are weakening our economy and bankrupting consumers. America needs a robust Consumer Financial Protection Agency that will even the playing field for consumers and bolster the economy.
That was the assessment of consumer advocates and Oregonians in a roundtable discussion today with U.S. Senators Chris Dodd of Connecticut and Jeff Merkley of Oregon.
Dodd has proposed, and Merkley supports, streamlining consumer-focused oversight of financial institutions into a new Consumer Financial Protection Agency (CFPA) that will end abusive financial practices. The CFPA will end predatory mortgage lending practices, credit card abuses and other faults in the financial system that have helped lead to the financial crisis.
Dodd chairs the Senate Committee on Banking, Housing and Urban Affairs, of which Merkley is a member.
“The financial crisis showed us that when consumer protections are a regulator’s secondary responsibility they just don’t happen,” said Dodd. “There needs to be an independent agency that looks out for people when they take out a loan, open a checking account or use a credit card.”
“From predatory loans to mortgages to credit cards, financial companies have been incorporating tricks and traps that strip wealth from Americans,” Merkley said. “We need an organization dedicated to consumers that calls out tricks and traps as they happen, not decades later.”
Bob and Marty Barney are just the type of consumers who the CFPA would help. After a long struggle with their mortgage company, the Barneys will lose their home.
“We can’t sell the house now. We have no choice but to foreclose,” Marty Barney said. “The system collapsed on us.”
Bob and Marty Barney are in their mid-sixties, live in Milwaukie, and have been married for 10 years. Marty works part-time as a registered nurse at a retirement village and Bob is semi-retired from the magazine publishing business. Until 2006, they had rented apartments, but they dreamt of the opportunity to buy their own home and live out their retirement together.
In a renter’s magazine, Bob and Marty spotted a free first time homebuyer seminar put on by a local mortgage company. They went to the seminar and the company showed them how they could purchase a home for the same amount they paid in rent – or so they thought. The company was fully integrated with their own real estate agents, loan officers, home inspectors and support personnel. They led the Barneys to believe that they were honest and had their best interests at heart.
The Barneys proceeded to purchase a home through the integrated real estate/mortgage company. They were told they would qualify for a loan of up to $300,000 at 7 percent interest. They selected their home, which was on the high side of their budget, but they were told that they would be able to refinance within a year and that during that time their equity would grow significantly.
When the loan negotiations began, Marty asked about whether they would qualify for VA financing as she had served in the Army Nurse Corps. The company’s loan officer told her that she wouldn’t have qualified. The Barneys have since found out they would have qualified, but were steered towards the subprime loan which is more lucrative for the company.
After the tough negotiations to secure a loan, the Barneys had the keys to their home in January of 2007. When the first mortgage statement arrived, it showed an interest rate of 9.7 percent - much higher than the 7 percent they had been told they would receive. Further, they realized that the monthly payment they were making was less than the amount of interest that the loan was accruing. They tried to refinance or sell the house, two things that became impossible once the market went under.
In a last ditch effort to try and prevent foreclosure, the Barneys worked with their mortgage servicing company to try and get them to accept a short sale. They have just received a rejection of the short sale offer leaving the Barneys with few options.
Bob and Marty said they are angry, frustrated and frightened. Their future is uncertain, as they have liquidated Marty’s IRA and they don’t know what their housing situation will be in the future. The pressure of this situation has exacerbated health issues for both of them. Through it all, they want to fight back to help keep this from ever happening to someone else and to preserve their dignity.
For more information about the CFPA, click into –