OCC Guidelines to Mortgage Lenders Show High-Risk Loans Have Put Millions of Homeowners in Financial Jeopardy22 December 2005
In response to the Treasury Department's (Office of the Comptroller of the Currency) new guidelines on non-traditional lending to homebuyers, North Carolina Fair Housing Center Director Stella Adams issued a statement today urging regulatory vigilance and consumer awareness to borrowers, especially in the current rising interest rate environment:
"I applaud the OCC and other regulating agencies for issuing these proposed guidelines aimed at protecting consumers. It shouldn't require government action to caution lenders from selling these provocative and dangerous mortgages to homebuyers who might not be able to afford what can happen when the teaser rate periods expire on these loans. The scariest of all exotic mortgages, the Option-ARM, allows a homeowner to pay what they wish and actually increase their debt instead of paying for their home. Lenders need to be more responsible and realize they are risking a family's financial stability for the sake of selling a bigger loan. There must be more careful consideration given to borrowers' financial security.
"These new guidelines show that the government has finally recognized the real risks for consumers, and America's housing economy as a whole. By 2007, more than $1.5 trillion in home mortgages are scheduled to adjust to current interest rates, which could shock many homeowners who purchased over the last couple of years while interest rates were at all-time lows. This could leave millions of homeowners in financial ruin, and potentially homeless.
"With these new guidelines from the OCC, there needs to be greater emphasis on alternatives and solutions for homeowners and future homebuyers. There are low-down payment options that are more secure and stable compared to Option-ARMs and other exotic mortgages. One solution is to use mortgage insurance to secure a 30-year fixed rate mortgage with a low five percent or three percent down payment, which will also avoid the need for a second mortgage or 'piggyback loan'."
Stella Adams is the Executive Director of the award-winning North Carolina Fair Housing Center, which provides community education in fair housing/fair lending issues; promotes community involvement in fair housing/fair lending issues and performs research and policy development in the area of fair housing. Ms. Adams also serves on the Federal Reserve Board Consumer Advisory Council, which advises the Board on the exercise of its responsibilities under the Consumer Credit Protection Act. Ms. Adams has testified before Congress on many occasions and is the recipient of the 2005 Civil Rights Award granted by the National Association of Human Rights Workers and has received the 2004 HUD FHEO Pioneer Award for her work in fighting predatory lending and the 2004 National Fair Housing Alliance Fair Lending Advocacy Award.
Source: prnewswire
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