Yara Zakharia, Esq.
Earlier last week, Chairman of the Federal Reserve Board Ben Bernanke issued a statement forecasting optimism concerning the impact of the struggles presently encountered in the real estate market. He stated that he did not expect troubles in the housing market to have a domino effect on the other sectors of the U.S. economy.
While finding Bernanke's comments to be encouraging, Senator Hillary Clinton underlined the importance of remaining vigilant and urged him to crack down on deceptive, unethical, and predatory lenders engaged in subprime lending practices that culminated in the current housing sector crisis. Senator Clinton stated that it "remains clear that reasonable measures that will restore stability to the entire housing market and strengthen the American people's confidence in what is oftentimes their most significant investment are still necessary."
In her May 17th letter addressed to Chairman Bernanke, Senator Clinton discussed the necessity for swift action in preventing a flood of foreclosures via tighter regulations on subprime mortgage lending. She called on Bernanke and the Federal Financial Institutions Council (FFIEC) to ensure that federal lending laws safeguard borrowers so that those in lower and middle-income brackets can continue availing themselves of real estate ownership opportunities by way of reliable mortgage products.
In her letter to Bernanke, Senator Clinton reiterated proposals she had made earlier in the year. In her initiative to tackle and resolve the existing escalating crisis confronting subprime mortgagors, she recommended that the following steps be taken:
First, she pressed Bernanke and FFIEC members to institute a one-on-one financial counseling service to assist property owners facing bankruptcy and borrowers planning to apply for a mortgage.
mortgage rates that surpass a certain amount and a restriction of the time period during which prepayment penalties would be applicable.
Thirdly, she pressed for a more effective Truth in Lending Act and a strengthening of federal regulations already on the books "to ensure that there is plain-talk, no-fine-print disclosure." Senator Clinton remarked that the absence of candidness and transparency among mortgage originators and creditors was an all-too common occurrence.
She also breathed new life into the 21st Century Housing Act by reintroducing it, with the intention of boosting the mortgage insurance program of the Federal Housing Administration (FHA). Senator Clinton said that more Americans, in particular those who resort to the subprime market, should be allowed to benefit from FHA loans, since they are a stable and responsible financing options.
Last but not least, Senator Clinton noted that in the next two years almost 2 million adjustable rate, subprime mortgages were expected to be reset. Consequently, she deemed it essential that creditor-aimed incentives be created for purposes of determining which at-risk borrowers are worthy and assisting them in avoiding foreclosure.
