– Oregon’s Senator Jeff Merkley today introduced two pieces
of legislation designed to protect homeowners from deceptive, unfair
lending practices. The Transparency for Homeowners Act ends secret steering
payments to brokers who lead homeowners into deceptive mortgages that
they cannot afford over the long term. The Promoting Mortgage Responsibility
Act prohibits the use of prepayment penalties that prevent homeowners
from refinancing into a more affordable loan.
“Irresponsible lending practices
like secret steering payments and prepayment penalties have turned home
mortgages into a scam,” said Merkley. “These deceptive practices
have had devastating consequences. Approximately 20,000 Oregon families
will lose their homes to foreclosure this year and millions more foreclosures
are expected across the country. The bills I am introducing today will
help families feel confident they are receiving a fair deal when applying
for a mortgage.”
Deceptive lending practices have created
a ripple effect that has sent the nation into economic recession. Under
the current rules, mortgage lenders have been allowed to purposefully
steer families into bad loans, even when they qualify for loans under
affordable terms. This practice has significantly contributed to the
current mortgage crisis. A study for the Wall Street Journal found that
61 percent of the subprime loans originated in 2006 went to families
who qualified for prime loans.
Nationwide, an estimated 2 million families will lose their homes this
year and up to 10 million over the next four years.
Prepayment penalties compound the problem
created by steering payments by making it unaffordable for families
to refinance into new loans with reasonable terms.
“Instead of fulfilling a dream and
contributing to a secure financial future, home mortgages have become
a vehicle for stripping wealth from working Americans,” said Merkley.
“This new legislation will restore transparency to the mortgage lending
process and help make home ownership a stable investment for families
Audio of Senator Merkley’s comments on the bill
is available here:
Video of Senator Merkley’s floor speech on the
legislation is available here: