Lowey Pushes Consumer Protection From Predatory Lending and Subprime Mortgage Crisis

HAVERSTRAW – Congresswoman Nita Lowey (D-Westchester/Rockland) today announced initiatives that she is advocating in Congress in response to the crisis in homeownership involving predatory lending and subprime mortgages.

“Congress took the first step toward helping borrowers two weeks ago by passing legislation that will give the Federal Housing Administration the ability to insure larger loans, but there is more that we can and should do to help borrowers,” said Lowey. “The current crisis is resulting in mortgage defaults and foreclosures, and it is threatening American confidence in the economy.”

Two weeks ago, the House passed legislation permitting the Federal Housing Administration to insure larger mortgages than previously allowed. This week, the House will consider a bill permitting homeowners who have had debt forgiven from foreclosure or renegotiation to exclude this from taxable income. Comprehensive legislation cracking down on predatory lending and taking other steps to help borrowers will be introduced in the coming weeks, and Lowey announced support for three specific measures that she hopes to include in the bill:
1. Reform bankruptcy code to allow courts the authority to provide relief on mortgage debt, the one major debt the courts are currently prohibited from relieving;
2. Eliminate “pre-payment penalties,” which punish borrowers who pay off their loans early; and
3. Crack down on racial discrimination in lending, wherein individuals may be steered toward loans with unfavorable terms based on race or ethnicity.

On September 6th, Congresswoman Lowey also contacted Chairman Bernanke to encourage him to exercise the Federal Reserve Board’s authority of the mortgage industry by strengthening relevant rules and ensuring that the finances of the American people are protected. On September 20, Chairman Bernanke committed to supporting better disclosure, new rules, and more uniform enforcement in the fragmented market structure of brokers and lenders.

According to The Journal News, the nationwide subprime mortgage crisis is affecting New Yorkers at home. In Rockland County, through July, the number of foreclosure filings brought by creditors rose 12.7 percent to 692 and judgments of foreclosure, in which the court authorizes lenders to take back the property that served as collateral for the mortgage, were up 94.4 percent to 175. In Westchester County, through August, filings rose 39.4 percent from 2006, to 1,414 and judgments were up 61.8 percent to 424.