Obama Mortgage Lending Policy

Obama Position on Predatory Mortgage Lending

The MBA, which represents the real estate finance industry, reported Thursday that the rate of loans entering the foreclosure process was 0.65 percent, versus 0.43 percent in the same period a year ago. Most of the increase was for subprime loans.

Some 2 million ARMs are due to reset to higher rates this year, making monthly payments unaffordable for many. The foreclosure problem will not be ending this year. It is estimated that it will continue to be an issue through a good part of 2009. As a result, the new legislation will have to address this growing crisis.

Obama's Response

Barack Obama responded specifically about predatory lending, raised home loan limitations, more lending restrictions, APR restrictions and changing disclosure laws. And he specified heavily criticized plans on what he wanted to do about it. But his voting record shows that he didn’t vote on the housing stimulus package. He is for the Dodd-Frank FHA Security Program, which he indicates isn’t a bank bailout or a bailout for troubled homeowners. FHA is part of the Department of Housing and Urban Development (FHA).

If elected president, Obama said he would create a $10 billion home foreclosure prevention fund, crack down on predatory lending and mortgage fraud and help existing homeowners rework their sub-prime loans to help them keep their homes.

Obama has backed a proposal to change the bankruptcy code, which would enable judges to order lenders to lower interest rates or modify loans for borrowers in some cases.

"It's time to amend our bankruptcy laws so families aren't forced to stick to the terms of a loan that was predatory or unfair," he says.

Housing Stimulus Package

Obama has said that the Dodd-Frank package is not a bailout for lenders or investors who "gambled recklessly."

The homeowners "will take their losses. It's not a windfall for borrowers. They will have to share any capital gain," Obama said of the legislation. "Instead, it offers a responsible and fair way to help bring an end to the foreclosure crisis."

Preventing Foreclosure (save people save their home)

(source: www.barackobama.com)

Barack Obama proposes to:

• Create a New FHA Housing Security Program: Barack Obama strongly supports the efforts of Senate Banking Committee Chair Chris Dodd (D–CT) to create a new Federal Housing Administration (FHA) program that will provide meaningful incentives for lenders to buy or refinance existing mortgages and convert them into stable 30-year fixed mortgages. This plan provides an important federal backstop – not a bailout – to this growing national problem. Neither lenders nor homeowners would receive a windfall from this plan.

• Create a Universal Mortgage Credit: Obama will create a 10 percent universal mortgage credit to provide homeowners who do not itemize tax relief. This credit will provide an average of $500 to 10 million homeowners, the majority of whom earn less than $50,000 per year.

• Ensure More Accountability in the Subprime Mortgage Industry: Obama has been closely monitoring the subprime mortgage situation for years, and introduced comprehensive legislation over a year ago to fight mortgage fraud and protect consumers against abusive lending practices. Obama's STOP FRAUD Act provides the first federal definition of mortgage fraud, increases funding for federal and state law enforcement programs, creates new criminal penalties for mortgage professionals found guilty of fraud, and requires industry insiders to report suspicious activity.

• Mandate Accurate Loan Disclosure: Obama will create a Homeowner Obligation Made Explicit (HOME) score, which will provide potential borrowers with a simplified, standardized borrower metric (similar to APR) for home mortgages. The HOME score will allow individuals to easily compare various mortgage products and understand the full cost of the loan.

• Create Fund to Help Homeowners Avoid Foreclosures: Obama will create a fund to help people refinance their mortgages and provide comprehensive supports to innocent homeowners. The fund will be partially paid for by Obama's increased penalties on lenders who act irresponsibly and commit fraud.

• Close Bankruptcy Loophole for Mortgage Companies: Obama will work to eliminate the provision that prevents bankruptcy courts from modifying an individual's mortgage payments. Obama believes that the subprime mortgage industry, which has engaged in dangerous and sometimes unscrupulous business practices, should not be shielded by outdated federal law.

Note: FHA is part of the U.S. Department of Housing and Urban Development (HUD).