Civil rights groups urge 6-month halt to foreclosures
Civil rights groups called today for a six-month moratorium on foreclosures resulting from high-risk loans given to people with shaky credit, arguing that lenders should help borrowers refinance their mortgages or face lawsuits. A coalition of advocacy groups said mortgage lenders should immediately halt foreclosures on so-called subprime mortgage loans made at high interest rates to people with weak credit histories. More than two dozen subprime lenders have either closed their doors or gone bankrupt since late last year. Those that remain in business have drastically trimmed their staffs, and larger, national lenders have eliminated jobs in their subprime mortgage divisions as they tighten credit standards.
Civil rights groups urge 6-month halt to foreclosures
NEW YORK Civil rights groups called today for a six-month moratorium on foreclosures resulting from high-risk loans given to people with shaky credit, arguing that lenders should help borrowers refinance their mortgages or face lawsuits.
A coalition of advocacy groups said mortgage lenders should immediately halt foreclosures on so-called subprime mortgage loans made at high interest rates to people with weak credit histories.
The groups, at a news conference in Washington, D.C., said a predicted wave of foreclosures stems from "reckless and unaffordable loans" for which investors bear some responsibility. They also said lenders, real estate agents and investors who bought subprime loans could face lawsuits under a federal law prohibiting housing discrimination.
Lenders, they said, should help homeowners affected by the problems in the high-risk mortgage market by allowing them to refinance their mortgages into conventional 30-year mortgages with a fixed interest rate.
"We know that there are safe and affordable loans that meet the needs of our communities," said Janet Murguia, president of the National Council of La Raza, the nation's largest Hispanic civil rights group. "We are calling on them to match families to the sustainable loans that they should have gotten in the first place...There are homes of families that can be salvaged."
The mortgage industry said lenders are already working to help distressed borrowers. John Robbins, chairman of the Mortgage Bankers Association, said many lenders are setting up payment plans to help avoid foreclosures among borrowers, many of whom have a hard time qualifying for refinancing.
"They are trapped and we are doing everything we can to help them, including looking at new products designed to help troubled borrowers," Robbins said in a prepared statement.
James Ballentine, director of housing and economic development at the American Bankers Association, said the call for a six-month moratorium is an "overreaction" to problems in the mortgage market.
There are many reasons borrowers default including medical bills and the loss of a jobs that don't necessarily mean a lender took advantage of them, Ballentine said.
The advocacy groups said high-interest rate subprime loans harm black and Hispanic homebuyers the most, citing data from 2005 showing that subprime loans represented more than 50 percent of all mortgages taken out by African American borrowers and 40 percent of Latino borrowers, compared with 19 percent of white borrowers.
The coalition argued that under the nation's fair housing laws, anyone involved in providing risky loans to minority borrowers who could not afford them could be held legally responsible including real estate brokers, banks, mortgage companies and investment firms.
Investment banks and commercial banks such as Bank of America Corp., Citigroup Inc., Credit Suisse Group, Goldman Sachs Group Inc. and Morgan Stanley provided subprime mortgage originators with short-term financing, bought loans from them and pooled those loans into securities to sell to investors.
Shanna Smith, chief executive of the National Fair Housing Alliance, said that, rather than going through with foreclosures, it would be cheaper for investors to replace mortgages at risk of default with loans that homeowners can afford.
"Why not refinance these loans?" she said. "The investor may lose a little bit of money, but they're not going to lose a lot of money."
The groups also said any anti-predatory lending legislation considered by Congress should give borrowers the right to sue their lenders.
The chairman of the House Financial Services Committee, Rep. Barney Frank, D-Mass., said providing relief to homeowners in danger of foreclosure is a priority, but said something as far-reaching as a six-month moratorium may not be possible, given the difficulties in determining who would qualify.
"Clearly some action is necessary," Frank said in an interview.
The distress in the market for subprime mortgages has roiled financial markets and stoked anxiety that it could spill over into the broader economy. Lender New Century Financial Corp. filed for Chapter 11 bankruptcy protection on Monday.
The real estate market's nationwide downturn has hammered employment in the real estate industry. Consulting firm Challenger, Gray & Christmas Inc. said today that job cuts in housing, including real estate, construction and mortgage lending, soared to more than 21,000 in the first quarter, compared with nearly 4,800 in the same quarter last year.
More than two dozen subprime lenders have either closed their doors or gone bankrupt since late last year. Those that remain in business have drastically trimmed their staffs, and larger, national lenders have eliminated jobs in their subprime mortgage divisions as they tighten credit standards.
Advocates say the mortgage problems are hitting homeowners in low-income neighborhoods the hardest. A study released today said by the Philadelphia-based Reinvestment Fund, said one in 30 Philadelphia homeowners has been a victim of predatory lending.