Senators to Borrowers: Drop Dead
The numbers behind the Oregon Senate turning its back on basic mortgage reforms.
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[February 27th, 2008]
When considering the Oregon Senate’s abject failure to do anything in the just-concluded special session to protect people seeking new mortgages, it’s helpful to consider some numbers.
This year, for instance, the advocacy group Our Oregon says 15,000 Oregonians’ adjustable-rate mortgages will “reset” to sharply higher rates that will cause many to hunt for new mortgages.
But will those potential borrowers enjoy any more protection than before this month’s legislative session from pre-payment penalties, or brokers who have incentives to rip them off?
The answer: an emphatic “no,” according to AARP Oregon, OSPIRG, Our Oregon and the Oregon Center for Public Policy, all of whom pushed for the Democratically controlled Legislature to enact lending reforms.
“Borrowers are no better off today than they were before the session began,” says OCPP director Chuck Sheketoff.
Lawmakers did pass bills that protect existing homeowners from foreclosure and that will require more reporting from mortgage originators. But neither helps new borrowers.
And protecting borrowers is important because the North Carolina-based Center for Responsible Lending expects 28,000 Oregon homes will go into foreclosure, primarily in 2008-2009. The center, which issued state-by-state projections last week on the impacts of foreclosures, says those foreclosures will contribute to a statewide decrease in Oregon home values of $2.5 billion .
Many of those foreclosures will result from subprime loans, which according to OCPP figures accounted for a quarter of all new Oregon mortgages in 2006.
Yet, when Sen. Ben Westlund (D-Tumalo) introduced a comprehensive lending-reform bill in the Senate a couple of weeks ago, the measure died without a floor vote.
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House Speaker Jeff Merkley (D-Southeast Portland) revived a stripped-down version of Westlund’s bill and coaxed it through the House, where D’s only have a 31-29 edge, with the help of three Republican votes.
Merkley’s bill contained a limitation on prepayment penalties similar to those in 30 other states and a requirement that brokers disclose all compensation rather than hiding various fees and kickbacks
In the Senate, however, where D’s enjoy an 18 to 11 majority (one, Avel Gordly, is an independent),leadership bottled Merkley’s bill up in committee, also denying it a floor vote.
Senate Majority Leader Richard Devlin (D-Tualatin) concluded after surveying colleagues that the bill simply lacked the votes to pass. Devlin says he would have liked to have helped borrowers. But he didn’t think floor discussion of a bill that might fail was a productive use of the chamber’s limited time.
Merkley, who is running in the May 20 primary for U.S. Senate, doesn’t like that answer.
“Thousandsof Oregonians’ financial futures are at stake,” Merkley says, referring to those whose mortgages reset this year and could have been helped immediately by his legislation. “The teaser rate is the bait and the prepayment penalty is the trap that chains them to exploding mortgages.”
But Senate Democrats ended up punting the issue to2009, which means thousands of new loans will include prepayment penalties and will lack full disclosure of how the mortgage broker is compensated.
“It’s enormously disappointing,” Merkley says.
THe best protection a borrower can have is their head. The government should not bail out a borrower if they are stupid. They got into the house, but did nothing to improve their credit during the initial 2 year period.
Regarding some of Nigels points.
15000 Oregonians' mortgages will have rates go up--- So what! Most will not go bankrupt or be foreclosed. They all clearly bought a product that stated it's intent. THE RATE WILL GO UP ON ##_##_## DATE. Anyone who was stupid enough to buy a home and not know what they were doing probably shouldn't own a home. Rent and let someone smarter handle the property ownership. Anyone with half a brain can search the Internet or look up a book in the library about mortgages and how the work. The idea that all these people were ripped off by brokers is ridiculous. There are certainly dishonest brokers out there but selling a product that the buyer should understand isn't dishonest just because the buyer is stupid.
28000 homes will go into foreclosure over next two years-- How many usually do in any year. Many of these would have anyway. If people are financially sound and make good decisions about home buying they rarely go into foreclosure. Most of these people didn't bother to think.
Nation wide 93% of mortgages are sound and being paid regularly. Only 2% will be foreclosed. That might be up from the norm but it's all because people made stupid decisions not because the government didn't hold their hands and protect them from their stupidity.
I agree with Nigel that thousands of people homes are at stake. Let them take foreclosure and learn something. they were stupid to begin with. It's not Oregon taxpayers fault.
The other millions of Oregonians and their hundreds of thousands of households shouldn't have to pay to bail out the stupid ones.
This is a typical Our Oregon and OCPP effort to try and use some people's incompetence to place additional burdens on the competent. One can never learn any life lessons if one is bailed out by the government for every mistake.
Would the same folks that want a bailout be willing to give the state their real estate profits when they occur? It is insulting to have the state responsible for individual responsibility. Why do you think the dollar is in the tank? The world markets know that we have more liabilities than ability to create assets. Those assets are getting repriced. A bailout is just another liability. Grow up people, tighten your belt, pay your debt and teach your children to be smarter than you. Sounds like the Senate did its job.
It also sounds like the newspaper is anti-responsible homeowner and pro-wreckless debtor.
It's true: We stand fully in favor of debtor wrecklessness. At least they'll save on car insurance.
Allow me to offer another perspective:
Over the last 10 years I have been saving more than half of my take home pay hoping to pay cash for my next home. Unfortunately the ready availability of low interest loans (some to less than qualified buyers) has tipped the supply and demand scale in favor of sellers. This has led to dramatic increases in the cost of housing.
Even living very frugally, I haven�t been able to keep up with Mr. Greenspan�s monetary policies.
Those who took out A.R.M.s for homes they couldn�t afford were simply speculating on inflation to bail them out. The Realtors convinced these fools that their inflation equity would allow them to refinance at more favorable rates before the day of reckoning; Caveat emptor!
I, as a taxpayer, have no obligation to rescue the speculators who have priced me out of the market.
Doug
It is not government's responsibility to bail out people that over extended themselves, or just made poor fianancial choices.