The Mortgage Bankers Association issued a statement this afternoon in response to a report released by the Center for Responsible Lending this morning, calling it misleading and self-serving.
In the report, the CRL claimed mortgage lenders weren’t doing enough to assist homeowners and suggested court-supervised modifications of distressed mortgages, a solution currently barred by existing bankruptcy laws.
“By choosing to misread and misinterpret the existing data on subprime loans, officials at the Center for Responsible Lending have again demonstrated they are more interested in advancing their own legislative agenda than in having an honest debate about the real scope of the problem and how to help those most in need,” said David G. Kittle, Chairman-Elect of the Mortgage Bankers Association.
“According to Moody’s, more than 50 percent of borrowers with subprime ARMs scheduled to reset in the first eight months of 2007 refinanced or otherwise paid off their loans prior to the rate reset.”
“So more than half of those loans that CRL cites as at-risk will never see their rates reset. In fact, the bankruptcy changes CRL advocates for would actually make it harder for consumers to refinance out of their subprime loans because it would increase the cost of all new loans.”
“And CRL’s stubborn insistence on clinging to ‘loan modification‘ as the only means by which a lender can help a borrower in trouble only serves to further mislead policymakers into overreaction.”
“Repayment plans, forbearance and even short sales are all widely accepted ways of helping a consumer avoid foreclosure. And yet CRL ignores them, because including them would better demonstrate the vast efforts lenders make,” Kittle continued.
It’s clear that the MBA is vehemently opposed to bankruptcy reform, releasing several statements claiming such legislation would cause mortgage rates to soar, and even going so far as to launch the “Stop the Bankruptcy Cram Down Resource Center”, which provides state and county-level data indicating the potential costs to the average homeowner.
“Policymakers should ignore this report as it is more rhetoric than fact. Bankruptcy reform is not the answer for consumers having trouble making their mortgage payments. It will drive up the cost of credit in the form of higher rates, larger down payments and greater closing costs.”
“Further, bankruptcy is a logistical and financial nightmare for consumers. Filing for bankruptcy is expensive and approximately two-thirds of all bankruptcy plans fail. Nobody should be holding it out as a better alternative to working with your lender to try to find a mutually agreeable resolution.”
On December 12th, the House Judiciary Committee passed HR 3609, the so-called “Emergency Home Ownership and Mortgage Equity Protection Act of 2007.”
The proposed legislation ends a 110-year old federal protection that prevents bankruptcy judges from altering the terms of mortgage loans tied to primary residences, a move the MBA believes will result in interest rates one-and-a-half to two points higher.
The battle rages on…