Clinton Introduces Home Ownership Protection and Foreclosure Prevention Bill

Washington, DC - In light of the ongoing turmoil in the housing market and the uncertainty surrounding millions of homeowners with adjustable rate mortgages, Senator Hillary Rodham Clinton today announced the introduction of the American Home Ownership Protection Act. The legislation contains a number of proposals that would regulate unscrupulous mortgage brokers, empower borrowers with better disclosure about their mortgages and better information on their mortgage professionals, and eliminate the worst elements of abusive mortgage products. Moreover, the legislation would set aside funding to help supplement foreclosure relief and prevention efforts at the state and local level and help support affordable housing funds throughout the country.

"With the recent discouraging housing data, we need to take swift action to help restore consumer confidence in the housing market and curb the abusive lending practices and mortgage products that helped spawn the current crisis," said Senator Clinton. "This legislation is a common sense proposal to help achieve those goals and helps families caught in the current housing slump to avoid foreclosure and mortgage default. I hope that the Senate takes up these proposals quickly."

The American Home Ownership Protection Act includes:

Ensure Full Disclosure of Mortgage Broker Compensation to Homebuyers

The Clinton legislation would require mortgage brokers to disclose to prospective homebuyers how their compensation increases if they steer the homebuyer to a more expensive mortgage product with higher rates and fees. Given that brokers and homebuyers interests are not always the same, borrowers need to be aware of this when assessing the advice brokers give them.

Require Federal Registration for Mortgage Brokers

A major component of the current housing crisis was unscrupulous mortgage brokers steering homebuyers into high cost and high fee mortgages, qualifying borrowers for unaffordable mortgages, and attaching fees unnecessarily. Currently, there is no national clearinghouse for information about individual mortgage brokers. The Clinton legislation would require registration for all mortgage brokers so that prospective borrowers can easily look up a broker's employment history, violations, complaints, and other information so that they can make an informed decision about their mortgage.

Eliminate Abusive Prepayment Penalties on all Mortgages

Prepayment penalties which significantly increase the risk of mortgage default are often used on subprime and non-traditional mortgages and are a problem for borrowers. These penalties can lock borrowers into loans until the rates and monthly payments escalate. Families should not be discouraged from responsibly paying off their mortgages early, particularly when this would allow them to avoid higher rates later The Clinton bill would eliminate this practice on all mortgages.

Prevent Foreclosures

The Clinton bill would establish a $1 billion fund to assist state programs that help at-risk borrowers avoid foreclosure. Many states have established partnerships with the nonprofit sector and housing industry enterprises to help borrowers renegotiate their loan terms, become current on their payments or simply provide financial counseling. These foreclosure mitigation efforts are more important than ever right now as the most recent housing data indicate a protracted slump.

Expand Fannie Mae's and Freddie Mac's Foreclosure Prevention Efforts

The Clinton legislation would expand the goals of Fannie Mae and Freddie Mac, the government sponsored enterprises (GSEs) that help stabilize the mortgage markets, to include helping a larger number of at-risk homeowners avoid foreclosure. This would be consistent with Fannie's and Freddie's existing goals that promote home ownership. The GSEs already help mitigate foreclosures by enabling some borrowers to swap into less risky, lower-cost loans. Fannie also helps homeowners arrange payment forbearance, financial counseling, and loan restructurings.

Expand Affordable Housing

The Clinton legislation establishes a $1 billion fund to support state, county, and municipal housing trust funds. Housing trust funds generally use dedicated funding sources to support initiatives like building subsidized rental housing and safety net housing, and they also support nonprofit housing developers. The fund would supplement the funding states, counties, and municipalities have already dedicated to these initiatives.

Increase Mortgage Fraud Investigation and Prosecution Efforts

The Clinton legislation would provide additional funding for the FBI and Department of Justice to hire more agents and prosecutors to investigate and prosecute mortgage fraud schemes, one of the fastest growing criminal enterprises, throughout the nation. Schemes like house "flipping," phony appraisals, and unscrupulous mortgage lending cost home buyers and lenders millions of dollars each year and have contributed to the current housing crisis.

The American Home Ownership Preservation Act follows Senator Clinton's initiative in addressing the subprime mortgage crisis, including calling for expanded access to independent face-to-face counseling; requiring "plain-talk, no-fine-print disclosure"; and encouraging "foreclosure timeouts" in which at-risk borrowers and lenders work out alternatives to foreclosure. She has also introduced the 21st Century Housing Act which will modernize the Federal Housing Administration so that it can be a viable alternative to the subprime mortgage market.

Source: Hillary Clinton

Please see: What if we could stop some foreclosure nightmares? We could, but it would take an Act of Congress!