Merkley Introduces Two Bills to Promote Mortgage Transparency and Protect Homeowners

Merkley Introduces Two Bills to Promote Mortgage Transparency and Protect Homeowners

Merkley Legislation to Ban Secret Steering Payments and Prepayment Penalties

Washington, DC – 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.”

[Audio of Senator Merkley’s comments is available here.]

[Video of Senator Merkley’s floor speech on the legislation is available here.]

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 once again.”

Audio of Senator Merkley’s comments on the bill is available here:

http://demradio.senate.gov/actualities/merkley/merkley090428.mp3

Video of Senator Merkley’s floor speech on the legislation is available here:

http://www.youtube.com/watch?v=TvKztTvNLfE