Research & Policy

As Congress considers the $700 billion bailout proposal, some argue that if the government acquires mortgage-backed securities (MBS) that include distressed loans, the government will have the right to modify those loans to prevent foreclosures. Unfortunately, this simply isn't true. Just as corporate bond holders have no right to control the bond issuer's management decisions, so too do MBS holders have no right to control how the trust manages the mortgages. The government will rarely become the owner of individual mortgage loans. 80% of subprime and Alt-A loans are securitized—the types of...

New Foreclosure and Spillover Projections We now project that almost 2.2 million subprime foreclosures will occur primarily in late 2008 through the end of 2009, up from our original 1.1 million estimate made in 2006. Additionally we estimate that 40.6 million homes in neighborhoods surrounding those foreclosures will suffer price declines averaging over $8,667 per home and resulting in a $352 billion total decline in property values. These new projections—representing only property value declines caused by nearby foreclosures, not other price drops associated with the slowdown in local...

New Foreclosure and Spillover Projections We now project that almost 2.2 million subprime foreclosures will occur primarily in late 2008 through the end of 2009, up from our original 1.1 million estimate made in 2006. Additionally we estimate that 40.6 million homes in neighborhoods surrounding those foreclosures will suffer price declines averaging over $8,667 per home and resulting in a $352 billion total decline in property values. These new projections—representing only property value declines caused by nearby foreclosures, not other price drops associated with the slowdown in local...

Any Real Financial Solution Must Stop Foreclosures The government's proposed bailout plan is a $700 million gift to the financial industry that comes with no accountability and will do nothing to stop millions of foreclosures. Under the Paulson plan, the government will take ownership of bad investments, not individual loans. Consider these facts: An estimated 2.3 million foreclosures will occur in the next two years. One-third (2 million out of 6 million) of borrowers with outstanding subprime loans are delinquent or in foreclosure. 40 million will see their home values decline due to...

Allowing the Federal government to purchase illiquid mortgage-backed securities (MBS) has been presented as a comprehensive solution to the economic crisis, but it has a serious flaw. This plan will NOT increase loan modifications that prevent foreclosures. Large-scale loan modifications—adjusting the terms of a loan to make it affordable—is the only way to prevent massive foreclosures still ahead. Under the bailout proposal, the government would simply become one of the investors that forecloses on homes. Mortgages are divided into groups owned by hundreds of thousands of interests. The...

Proposed financial bailout bill will not help people save their homes. The government proposes to purchase hundreds of billions of dollars of illiquid mortgage-related assets as a response to this country's financial crisis. The vast majority of these assets are securities issued privately through Wall Street that are backed by subprime or Alt A home loans, meaning that the government will own only a portion of these individual home loans. As such, the government will have no ability to modify the underlying loans; there will be dozens of other owners scattered around the globe who would need...

Committee: U.S. House of Representatives Committee on Financial Services Subcommittee on Oversight and Investigations

Over 700 payday lenders charging up to 459% annual percentage rate (APR) for a two-week loan are located throughout Arizona; with the highest concentrations per capita in Pinal, Mohave, and Maricopa Counties. A typical Arizona borrower pays an estimated $516 in fees for a $325 payday loan and still owes the $325 in principal. Overall, payday lending costs Arizona families nearly $149 million each year. Payday lending drains $91 million and $23 million from Maricopa and Pima County households, respectively. Payday lenders will no longer be able to charge triple-digit interest rates when their...

Committee: California State Assembly Banking and Finance Committee

Download Paul Leonard's Presentation >> Committee: California State Assembly Banking and Finance Committee

Committee: U.S. House of Representatives Committee on Financial Services For questions about this testimony, contact Julia Gordon at julia.gordon@responsiblelending.org or (202) 349-1878.

CRL has uncovered substantial evidence that IndyMac Bank engaged in unsound and abusive lending during the mortgage boom, routinely making loans without regard to borrowers' ability to repay. CRL interviews with former employees and lawsuits in 10 states indicate that IndyMac: pushed through loans based on bogus appraisals and income data that exaggerated borrowers' finances, worked hand-in-hand with mortgage brokers who misled borrowers about their rates and other loan terms and stuck them with unwarranted fees, and treated many elderly and minority consumers unfairly. In interviews and court...

HR 6076: Home Retention and Economic Stabilization Act Why is H.R. 6076 needed? Approximately 20,000 subprime foreclosures are starting every week, and the situation is projected to get worse. The rate of foreclosures continues to accelerate, despite the efforts of programs like HOPE NOW, which encourage lenders and servicers to avoid unnecessary foreclosures by voluntarily modifying loan terms to make them commercially reasonable and sustainable. Housing counselors and loan servicers are overwhelmed by the numbers of families needing assistance and have not had time to staff-up to meet the...

Read the executive summary (pdf) >> Unfair bank practices threaten to shred the safety net of Social Security for older Americans New CRL research finds that unauthorized overdrafts strip fees from Americans 55 and older at the level of $4.5 billion per year. Nearly $1 billion of that comes from people who are heavily dependent on Social Security income. CRL's June 18, 2008 report also finds that debit cards are the most frequent trigger for overdrafts even for people 55 and older – these debit card overdrafts are both extremely costly and easy to prevent if the banks were interested in...

In May 2008, the Federal Reserve Board, the Office of Thrift Supervision, and the National Credit Union Administration issued a joint proposed rule governing overdrafts. The rule would allow financial institutions to continue giving customers expensive loans even though they never asked for them. Research shows that the vast majority of bank customers are automatically signed up to receive costly overdraft loans, but would rather transactions be declined if they don't have sufficient funds in their bank account. But the regulators' proposed rule puts the burden on consumers to unsubscribe if...

Committee: U.S. House of Representatives Committee on Small Business For questions about this testimony, contact Julia Gordon at julia.gordon@responsiblelending.org or (202) 349-1878.