Released: May 04, 2007

Schumer takes aim at subprime lending

Source: Jonathan Peterson, Los Angeles Times (Free Registration)

In a bid to stop a wave of foreclosures, Sen. Charles E. Schumer (D-N.Y.) on Thursday urged Congress to approve $300 million for counseling and outreach efforts to help beleaguered borrowers hold onto their homes through refinancing deals and other financial strategies that would require cooperation from private lenders.

Schumer also proposed legislation to hold mortgage brokers and independent, non-bank lenders such as Ameriquest Mortgage Co. legally responsible for making loans that borrowers can understand and can afford.

The separate proposals represent the first legislative attempts to address the problem of rising foreclosures, a situation that has worsened nationwide during the last year. In many cases, borrowers were enticed by artificially low entry costs. The loans, often marketed by brokers and independent lenders, eventually soared in cost.

“The sub-prime mortgage market has been the Wild West of the mortgage industry for far too long,” Schumer said Thursday, referring to high-cost loans aimed at people with weak credit. Such loans have been failing at a rapid rate, sending jitters throughout the mortgage industry and adding instability to Wall Street. “Our proposal brings the sheriff back in town,” he said.

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