NEW YORK – Civil rights groups called Wednesday for a six-month moratorium on foreclosures resulting from high-risk loans given to people with shaky credit, arguing that lenders should help borrowers refinance their mortgages – or face lawsuits.
A coalition of advocacy groups said mortgage lenders should immediately halt foreclosures on so-called subprime mortgage loans made at high interest rates to people with weak credit histories.
The groups, at a news conference in Washington, D.C., said a predicted wave of foreclosures stems from “reckless and unaffordable loans” for which investors bear some responsibility. They also said lenders, real estate agents and investors who bought subprime loans could face lawsuits under a federal law prohibiting housing discrimination.
Lenders, they said, should help homeowners affected by the problems in the high-risk mortgage market by allowing them to refinance their mortgages into conventional 30-year mortgages with a fixed interest rate.
“We know that there are safe and affordable loans that meet the needs of our communities,” said Janet Murguia, president of the National Council of La Raza, the nation’s largest Hispanic civil rights group. “We are calling on them to match families to the sustainable loans that they should have gotten in the first place.”
The mortgage industry said lenders are already working to help distressed borrowers. John Robbins, chairman of the Mortgage Bankers Association, said many lenders are setting up payment plans to help avoid foreclosures among borrowers, many of whom have a hard time qualifying for refinancing.
“They are trapped and we are doing everything we can to help them, including looking at new products designed to help troubled borrowers,” Robbins said in a prepared statement.
James Ballentine, director of housing and economic development at the American Bankers Association, said the call for a six-month moratorium is an “overreaction” to problems in the mortgage market. There are many reasons borrowers default – including medical bills and the loss of a job – that don’t necessarily mean a lender took advantage of them, Ballentine said.
The coalition argued that under the nation’s fair housing laws, anyone involved in providing risky loans to minority borrowers who could not afford them could be held legally responsible – including real estate brokers, banks, mortgage companies and investment firms.
Shanna Smith, chief executive of the National Fair Housing Alliance, said that, rather than going through with foreclosures, it would be cheaper for investors to replace mortgages at risk of default with loans that homeowners can afford.