WASHINGTON — Self-Help Credit Union CEO Martin Eakes, also CEO of the Center for Responsible Lending, told the Senate Banking Committee during a Feb. 7 hearing that the “subprime mortgage market today is a quiet but devastating disaster.” He continued, “The ultimate effects are very much like Hurricane Katrina, as millions of citizens lose their homes and the fabric of entire communities is threatened. The difference is that this disaster in the subprime market is occurring every single day across the country, house by house and neighborhood by neighborhood.” The hearing was entitled Preserving the American Dream: Predatory Lending Practices and Home Foreclosures.

Eakes' recommendations to restore responsibility to lending included:

1) Requiring “ability to repay” standards;

2) Imposing a fiduciary duty on mortgage brokers to their clients;

3) Requiring the Federal Reserve Board to use its authority to address predatory mortgage lending under the Home Ownership and Equity Protection Act;

4) Banning government sponsored enterprises from supporting abusive subprime loans; and

5) Passing a strong, national anti-predatory lending bill.

According to the CRL's analysis of subprime mortgages made in recent years, about 2.2 million families are destined to lose their homes to foreclosure, “foreclosures that were, for the most part, predictable and entirely avoidable through more responsible lending practices. As housing appreciation slows down in many areas of the country, it is clear that the problem will only grow worse. All indications are that subprime mortgage loans are headed toward the worst rate of foreclosures in modern mortgage market history.”

The urgency of the problem has grown since subprime mortgages are no longer a niche market and now comprise well over 20% of all home loan originated and $1.2 trillion in total outstanding mortgages. The issue is particularly serious for minorities.

Aside from Eakes, witnesses testifying at the hearing included National Association of Mortgages Brokers President Harry H. Dinham, NAACP Executive Director Hilary Shelton, AARP Senior Attorney Jean Constantine-Davis and Mortgage Bankers Association Chief Economist and Senior Vice President of Research and Business Development Douglas G. Duncan, as well as two consumers. –scooke@cutimes.com

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Subprime Mortgage Market is a 'Quiet but Devastating Disaster,' CU CEO Tells Congress

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