SAN FRANCISCO, Oct. 19 /PRNewswire-USNewswire/ -- Four nationally
recognized community reinvestment groups roundly commended the proposal of
Federal Deposit Insurance Corporation chairwoman Sheila C. Bair to freeze
so-called "hybrid" mortgages at the introductory rate.
"We support Chairwoman Bair's recommendation," says Alan Fisher,
executive director of the California Reinvestment Coalition. "In our
meetings with major lenders, this is what we have asked them to do. We will
continue to call for a moratorium on foreclosures of subprime loans until
recommendations like Chairwoman Bair's are in place. Without adoption of
such loan modifications California will experience an economic Tsunami."
The California Reinvestment Coalition along with the Woodstock
Institute, Neighborhood Economic Development Advocacy Project of New York
and Community Reinvestment Association of North Carolina welcomed
Chairwoman Bair's proposal after warning regulators and Congress for years
that irresponsible underwriting standards among America's largest lenders
would eventually fuel a crisis in the housing market.
"This is the kind of leadership that has been long absent among banking
regulators and Congress and we commend Chairwoman Bair for her creative and
timely action," said Malcolm Bush, president of the Chicago-based Woodstock
Institute.
Hybrid loans, also called 2/28s or 3/27s, were a popular mortgage
product throughout 2005 and 2006. The loans offered borrowers a low
introductory rate for the first two or three years then raised rates, often
dramatically, for the remainder of the loan term. The result was a payment
that went from barely affordable to unaffordable, sometimes overnight.
"The solution Chairwoman Bair proposes will help a large subgroup of
homeowners who were sold hybrid loans and can afford to pay the
introductory rate for the life of the loan," said Sarah Ludwig, Executive
Director of the Neighborhood Economic Development Advocacy Project (NEDAP),
in New York City. "Too often, however, even the introductory rate is
unaffordable, and servicers will need to ensure that loans are modified on
terms that are affordable to borrowers."
The solution is not a bailout, but a practical solution to a
complicated problem that, to date, both regulators and Congress have
utterly failed to address. Although a number of steps need to be taken to
protect homeowners facing the complex problem of foreclosure, Chairwoman
Bair has recognized the magnitude of the situation and placed
responsibility where it belongs -- on financial institutions that lost
control of their own products.
The California Reinvestment Coalition advocates for the right of
low-income communities and communities of color to have fair and equal
access to banking and other financial services. CRC has a membership of
more than 250 nonprofit organizations and public agencies across the State.
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