Mortgage Market Solution Urged By Another Candidate

Another prominent U.S. Senate figure has joined the chorus of lawmakers and officials looking for a fix to the subprime, high-cost mortgage industry.

Sen. Hillary Rodham Clinton (D-N.Y.) proposed a plan to help borrowers facing foreclosure, while preventing others from falling into the same traps.

The Democratic presidential candidate, speaking before about 500 community and fair-lending activists from around the country, called the collapse of the bad credit mortgage market, which is still ongoing, a threat to the housing market and the entire economy.

Clinton said it’s symptomatic of a system that isn’t keeping its word to Americans.

“I believe in the basic bargain: If you work hard and play by the rules, you ought to be able to get ahead,” she said in a lunchtime address to the National Community Reinvestment Coalition’s (NCRC) annual conference.

“The basic bargain is breaking down when it comes to home ownership.”

Her plan includes several provisions to help future borrowers avoid bad, high-priced mortgage products in the first place, through education and alternatives.

The solution proposed by Mrs. Clinton also includes a recommendation for the home loan borrower’s mortgage company to help when they first get into trouble.

But it wouldn’t help those who have already lost their homes, and offers little for those who are threatened with foreclosure now.

And with one exception, it doesn’t ban any of the practices that consumer advocates say created the mortgage problem in the first place.

Clinton’s remarks, and the meeting at which she presented them, come at a time when lawmakers, regulators, and investors struggle to respond to the sudden and severe downturn among so-called “subprime” mortgage companies, who have been loaning money to borrowers with spotty credit ratings.

The industry grew rapidly for years on the strength of the booming housing market and high profits that drew major Wall Street banks and firms to support mortgage brokers and mortgage lenders both by financing and by purchasing the home loans for sale to investors as securities.

However, the bottom has fallen out in recent months, as rising mortgage interest rates and falling or flat housing values mean borrowers can no longer afford their payments and can’t refinance or sell their homes.

NCRC says one in five subprime mortgages will be losses.

Housing experts predict between 1 million and 3 million Americans may lose homes to foreclosure this year, while 100,000 employees in housing fields could be laid off and about 100 companies could fail.

Meanwhile, critics of the industry, including those Clinton addressed, also worry about the damage done to borrowers and the need to help them. Clinton acknowledged that their past warnings “have gone largely unnoticed.”

In her keynote speech, the senator and former first lady echoed the group’s calls, noting that FHA loans used to be responsible for 12 percent of the market in 1990, but now comprise just 3 percent of mortgages.

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