John Taylor

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(No Transcript)
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John Taylor
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John Taylor
President and CEO, National Community
Reinvestment Coalition
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(No Transcript)
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Continuing Wealth Disparitiesby Race / Ethnicity
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Wealth Disparity Assets Owned by Income Level
Next 10
Bottom 80
Next 9
Top 1 of households
2003
NCRC - Confidential
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Mortgage Tsunami - The Perfect Storm

• Predatory Exotic Mortgages
• Inflated Appraisals
• Increased Foreclosures (Harv. Jt Center)
• Declining Housing Prices
• Decline in Real Wages
• Homeowners Insurance - rising costs
• Rising Interest Rates
• Vacant housing saturates market

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Foreclosures
Projected foreclosures Over next 12
months 1,788,000 homes
Mortgage Tsunami
March, 2007
March, 2006
March, 2005
March, 2001
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Exhibit 42 Adjustable Rate Mortgage Reset
Schedule
Peak reset rates

for Option ARMs,
Unsecuretized
ARMs is


last
10 weeks of 2007
Source Credit Suisse Fixed Income U.S. Mortgage
Strategy Note Data as of January 2007
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Need a National Anti-Predatory Law

• System for accessing mortgages must be fair and
  competitive
• Escrow for Taxes and Insurance
• Eliminate or drastically reduce Stated Income or
  Low Documentation Loans
• Limit prepayment penalties after expiration of
  teaser rates
• Ability to Pay - not only at loan closing
• Assignee Liability

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Other Needs

• Bank Regulatory agencies must see their clients
  as consumers, not the lenders
• Lenders, consumers, and their associations must
  come together and see that Americas future is at
  stake. We need a responsible lending coalition.
• Work together to eliminate bad actors
• Work together to produce meaningful laws that
  protect consumers but constrict only the
  predatory lending practices
• We must clean up the appraisal practices
• Title Insurance must be more competitive
• Homeowners insurance must be available to all
• Need national licensing standard that covers
  brokers
• Need CRA for the Credit Unions

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• Thank you
• You need to visit
• www.communityinvestmentnetwork.org

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Allen Fishbein
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Allen J. Fishbein
Director of Housing and Credit Policy Consumer
Federation of America
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"New Challenges to Preserving and Supporting
Sustainable Homeownership"
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Risky Lending Greatest Threat to Sustainable
Homeownership

• Homeownership traditionally has been the most
  accessible tool available to enable families to
  build wealth and to foster neighborhood stability
• These benefits are eroded when it becomes easier
  for consumers to buy houses, than to keep them
• The proliferation of risky loan products
  threatens sustainable homeownership
• Subprime mortgage meltdown threatens to result in
  a net loss of homeownership
• Common-sense reforms are needed to preserve and
  support sustainable homeownership

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More Subprime Woes Ahead

• 600 billion Subprime Loans Face Rate Reset
  Within Two Years
• Subprime Defaults Hit 10-Year High
• SP market represents 13 of outstanding mortgages
  but over 60 of foreclosures
• 20 (1 in 5) subprime loans issued in 05/06
  forecasted to go into default
• Placing as many as 2.2 million households in
  danger of losing their homes
• Subprime foreclosures hitting some areas harder
  than others especially severe in predominately
  minority localities - threatens to reverse
  recent homeownership gains
• Subprime Foreclosure Tsunami - Tip of the
  Iceberg?

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Evidence of Consumer Confusion in Understanding
Mortgage Risks

• 34 of homeowners dont know what type of
  mortgage they have (survey for Bankrate.com)
• 40 of ARM borrowers underestimate the amount of
  rate change (2006 Fed Reserve survey)
• Over 1/3 consumers preferring ARMs could not
  calculate the payment increases (2004 Consumer
  Federation of America survey)
• 24 of homeowners are anxious about ability to
  make mortgage payments (Survey for TransUnion by
  GfK Roper)

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Improved Disclosures and Better Borrower
Education Necessary, But Not Sufficient

• Truth-in-Lending Act disclosures perpetuate
  confusion about ARMs and Non-Traditional
  Mortgages
• Disclosures should be more timely, clear and
  balanced
• Consumers also need better education about the
  home buying process, loan products and players
• While important, better disclosures and education
  are not enough
• Disclosures do not inform consumers whether other
  loans better fit their needs
• Mortgages are increasingly complex, particularly
  for the most vulnerable borrowers
• Mortgage professionals are in a better position
  to evaluate home loans than ordinary consumers

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• Every time I have sat to close my own mortgage
  loan I have felt at a disadvantage in terms of
  my understanding so I can imagine what a first
  time buyer must feel.
• - Former Fed Reserve Governor Mark
  Olson

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Improved Protections for Consumers Seeking
Mortgage Credit

• Establish duty of care standard for loan
  originators that includes...
• Qualifying borrowers based on long-term
  affordability
• Escrow taxes and insurance
• Documentation of applicants income
• No anti-competitive fees
• No steering
• Meaningful enforcement and accountability for
  abusive or irresponsible actions by all
  participants in the lending chain

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Active Participation in Borrower Assistance

• Lenders, servicers and investors must actively
  engage in constructive solutions
• Three to six million families are now mired in
  harmful subprime loans (3/4 of these will
  dramatically reset in coming months and years)
• All parties in the lending chain have
  responsibility for reducing economic distress for
  at-risk homeowners

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www.consumerfed.org