Washington, DC – Oregon’s Senator Jeff Merkley will continue his push to restore fairness to American homeowners by chairing an upcoming hearing in the Banking, Housing and Urban Development Committee. Today, Merkley offered an amendment to the Senate housing bill that would ban steering payments and prepayment penalties that drive Americans into bad loans and then prevent them from refinancing on fair terms. He later agreed to revisit the matter in future legislation after Banking Committee Chairman Chris Dodd of Connecticut pledged to hold a committee hearing on this issue.
“Unfair lending practices trapped millions of Americans into loans they simply could not afford. When those loans started to default, it drove the economy into the ground, causing hardship for working families and bringing our financial system to the brink of collapse,” said Merkley. “I look forward to working with my colleagues on the Banking Committee to examine the practices that contributed to the collapse and crafting necessary reforms.”
Merkley’s amendment is based on two bills he introduced earlier this week: the Transparency for Homeowners Act and the Promoting Mortgage Responsibility Act, which prohibit steering payments and prepayment penalties, respectively. These two practices have contributed significantly to the current housing crisis. Steering payments of thousands of dollars encouraged mortgage brokers to push homeowners into bad loans, even when they qualified for loans under affordable terms. A study for the Wall Street Journal found that 61 percent of the subprime loans that originated in 2006 went to families who qualified for prime loans.
Meanwhile, prepayment penalties kept families in those bad loans by making it prohibitively expensive to refinance.
In an exchange on the floor of the Senate, Banking Committee Chairman Chris Dodd agreed to hold hearings on predatory lending practices in the near future. He further asked Senator Merkley to chair a committee hearing on predatory practices, including prepayment penalties and steering payments. Senator Merkley accepted Senator Dodd’s invitation and is looking forward to drawing attention to these issues in the hearings.
“We need to shine a bright light on the deceptive practices that have driven millions of families into foreclosure,” said Merkley. “I thank Chairman Dodd for his focus on this issue and I intend to work closely with him to make sure homeowners are not hurt by these tactics again.”