Mortgage reform gets backing, at least on principle
WASHINGTON — Banking industry trade groups Monday endorsed mortgage reform principles as the distressed market for high-risk home loans worsens and Congress ponders whether to intervene.
The statement from five industry groups says lenders are already stepping up efforts to assist borrowers who face default or foreclosure. And the statement from the trade groups emphasizes that lenders are voluntarily tightening standards.
Legislation or new regulations should focus on lenders only being permitted to issue high-risk home loans — if they “reasonably believe” that borrowers have the ability to pay the loans “based on information available at the time the loan is made,” the statement said.
Mortgage terms should be “clearly disclosed” to consumers, and estimates of monthly payments that could quickly jump should be made clearer, the groups said.
The industry’s efforts come amid increasing evidence of financial woes for home owners with weak credit histories.
RealtyTrac Inc., an industry research firm, said last week mortgage lenders foreclosed on 62 percent more U.S. homes in April than a year ago.
Home prices are also still falling. The national median existing single-family home price in the first quarter was $212,300, down 1.8 percent from a year ago when the median price was $216,100, according to the National Association of Realtors.
The median is a typical market price where half the homes sold for more and half the homes sold for less.
The statement came from Financial Services Roundtable, American Bankers Association, Mortgage Bankers Association, Consumer Bankers Association and America’s Community Bankers.