Democratic Presidential Candidates Discuss the Mortgage Industry After a Wave of Foreclosures

As many US homeowners are facing foreclosures because of the subprime loan mess, several Democratic presidential candidates are facing the issue head on and are discussing possible solutions. Many of the candidates believe the problem is with the mortgage broker. Senator Barack Obama has brought legislation to the Senate that targets loan fraud and predatory lending practices. John Edwards, a former senator from North Carolina, says that he would like to get rid of some fees, set up licensing standards for brokers and start a database for infractions by lenders. Just last week, Senator Hillary Clinton stated her own plan to deal with predatory lenders, stating that she wanted to crack down on lenders taking advantage of borrowers to help prevent foreclosures. The National Association of Mortgage Brokers replied immediately, stating that she was pointing fingers at mortgage companies and small lenders, and that there were other responsible and there needed to be wider scrutiny. The association states that the whole mortgage industry needs to be inspected, from the beginning when buyers first start looking at houses to the end with brokers, bankers and lending agencies to help prevent foreclosures. The mortgage companies and brokers are carrying most of the blame for the subprime mess, and many think there are more to blame than just the brokers-after all, the loans provided by brokers wouldn’t be available if Wall Street wasn’t able to sell them on the market. Hillary Clinton also asked for a national registry for mortgage companies. Shortly after Clinton presented her plan on how she planned on handling the mortgage meltdown, Senator Christopher Dodd came out with a plan that includes stopping mortgage brokers from reaping financial benefits when they have clients obtain loans with higher interest rates. Senator Dodd, another Democratic presidential candidate has faced this issue as a member of the Senate Banking Committee, and has been more up front about the issue to voters. Dodd also stated that many brokers lead borrowers to believe that they are working for them, and that many borrowers don’t realize their broker is not keeping their best interests in mind. Dodd also wants to

-End penalties for prepayment-fees that a borrower must pay if they pay off the loan early

-Ensure that borrowers can afford the loan at the full interest rates instead of just the low teaser rates

-Force lenders to escrow for insurance and taxes and explain the fees to borrowers

-Stop offering liar loans, or loans that require little or no documentation proving a borrowers income or assets.

The National Association of Mortgage Brokers does support requirements for escrow on some subprime loans, including those with loan-to-value percentages higher than 80%, as well as regulations regarding liar loans, or no documentation loans. However the association does not agree with Dodd on abolishing pre-payment penalties. Voters can be sure they have not heard the end of the loan debate, and that with more possible foreclosures and real estate problems on their way, the mortgage industry issue is sure to be a large one in 2008.