Senator: Better Bad Credit New York Mortgage Regulations Needed

Sen. Charles Schumer warns that 91,000 New York families are at risk of losing their homes when the rates of their bad credit mortgages increase, and said more federal oversight is needed in the subprime lending market.

“The subprime market is the wild west of mortgage loans, and it’s time we bring a sheriff into town,” Schumer said. “The first step is making sure that borrowers are protected from these usurious lenders.”

Subprime lenders peddle mortgage products that often require no money down and are made at a “teaser” initial interest rate that soon rises.

They target marginal borrowers with weak credit or questionable incomes who previously might not have gotten a home loan at all.

Schumer said an analysis by his office found that around 1.8 million American families, including 91,325 in New York State, are at risk of foreclosure when the rates are reset within two years.

He said more federal regulation is needed to protect home buyers from unscrupulous home loan lending practices.

Schumer said his plan would create a national regulatory system for New York mortgage broker groups and loan officers, including individuals at non-bank companies.

In addition, Schumer said his bill would establish a suitability standard for borrowers so that a New York mortgage lender won’t be able to issue a loan that the borrower cannot afford.

Schumer also proposed setting up a New York state Foreclosure Prevention Task Force, including non-profit groups that focus on housing issues such as ACORN.

“The bottom line here is that the [bad credit mortgage] bust is leading us right into a foreclosure boom, and thousands of people will be left in the lurch,” Schumer said.

“We are staring straight into the barrel of the biggest foreclosure crisis ever, and unless action is taken, economic forces will have no choice but to pull the trigger.”

SOURCE: Newsday