03.14.07
Predatory Lending Initiatives - is it all just Talk?
Freddie Mac, the major secondary mortgage market investor announced that it is working closely with customers in the primary market to fight predatory lending and foreclosures. In so doing, it says it has developed higher underwriting standards. Its recent changes to fight predatory lending include:
• FHLMC will refuse to do business with institutions that it identifies as engaging in predatory lending practices;
• FHLMC will refuse to invest in
o high-rate or high-fee mortgages as defined by the Home Ownership and Equity Protection Act of 1994 (HOEPA)
o sub-prime mortgages with prepayment penalty terms of more than three years
• FHLMC is also requiring its lenders to provide complete credit information about borrowers to all credit bureaus and reporting agencies.
• and encourages consumer education through programs such as CreditSmart, and Don’t Borrow Trouble, which are programs designed to help borrowers understand the mortgage origination process, housing finance options, and how to avoid abusive lending practices and foreclosures.
I don’t see this as fighting Predatory lending. I see it as an ad campaign for trying to look like they are making an effort. This is such a minimal effort – kind of like saying “okay, maybe we should meet the law”
I am NOT for Government intervention. But based on the loans appearing in the market, and the crazy predatory advertising I see, there have to be some changes! Many in the mortgage industry and the title industry have dropped their standards to all time lows. That costs all of us. I actually hope the Government will intervene. It seems to be the only way to keep foreclosures from continuing to skyrocket, Lenders and Title Companies from dropping standards to all-time lows. It seems that ethics and morality just don’t seem to matter if companies can make a bigger buck.