Borrowers from racial minorities accounted for a large portion of the U.S. population whose homes fell into foreclosure between 2004 and 2008, according to a report by the Center for Responsible Lending cited by the Daily. Approximately 6.4 percent of mortgages taken out in that four-year period have fallen into foreclosure, and another 8.3 percent of the mortgages taken out during that period are on the brink of foreclosure.

African-Americans and Latinos were more likely to be sold risky loans between 2004 and 2008, the report shows, making them more inclined to default. Even minority borrowers with great credit scores were more likely to pay higher rates than white borrowers. [more]

The United States is not even halfway done with its foreclosure crisis, according to a report from the Center for Responsible Lending. Florida leads the country with a rate of 17.4 percent of all first mortgages on “owner-occupied homes” either seriously delinquent or in foreclosure. “The bottom line: the foreclosure crisis isn’t going away,” the CRL said in a statement. “Families that could have benefited from home ownership are instead being kicked down the economic ladder, home prices keep falling and economic recovery remains stalled.” [Sun Sentinel] [more]

You may have seen reports that the federal government is proposing new mortgage finance rules under which only home purchasers who can afford a minimum 20 percent down payment on a conventional loan would get a shot at the best available interest rates and terms.

That is correct, and it’s deeply sobering news for large numbers of first-time and moderate-income buyers who can’t come up with that much cash or afford to pay higher rates.

But some of the other requirements that federal agencies and the Obama administration are proposing in the same plan have gotten much less attention, yet could prove just as troublesome for consumers: [more]

Disagreements are underway in Washington over how much to punish the banks involved in mortgage fraud abuse and over who should benefit from a settlement, the New York Times reported. The newly created Consumer Financial Protection Bureau is pushing for $20 billion or more in penalties, a measure which is supported by the attorneys general and the Federal Deposit Insurance Corporation. But other regulators, including the Office of the Comptroller of the Currency, which oversees national banks, and the Federal Reserve, do not favor such a large fine, contending that a small number of people were the victims of flawed foreclosure procedures. [more]

Congress reached an agreement today on the terms of the long-debated
finance reform bill, which could have wide-ranging implications for the mortgage industry, if the bill is approved by a vote, according to the New York Times. Analysts expect the congressional vote to take place in the coming days. Under the
terms of the bill, mortgage lenders would be required to look more closely at borrowers’ qualifications, making mandatory checks on their
income and assets before granting a loan. Other rules include a ban on payment penalties for
people with adjustable rate mortgages. Mortgage brokers and bank
employees will no longer be able to earn bonuses based on the type of
loan they issue, in the hopes that this will eliminate any incentive
to push high-interest loans on borrowers to inflate bank profits.
According to Julia Gordon, senior policy counsel for the Center for
Responsible Lending, there will also be a cap limiting mortgage
origination fees to 3 percent of the loan, with exceptions for
required upfront mortgage insurance premiums. [NYT]

[more]

Congress is pushing for legislation designed to curb abusive lending practices that lured people into ill-suited loans prone to
foreclosure, the Washington Post reported. The main goal is to align the financial incentives of lenders with the financial well-being of consumers. The provisions would change the way loan officers are compensated and hold lenders responsible for their loans, by requiring them to extend mortgages only to borrowers who can repay them and limit penalties for those who pay off their loans early. “It would have been unthinkable to get through financial reform without addressing the mortgage market because this is why we are in the mess we’re in,” said Julia Gordon, senior policy counsel at the Center for
Responsible Lending, which supports the provisions. Advocates for the mortgage industry, who have resisted federal regulation in the past, are likely to object, but the industry has accepted that some changes are inevitable. The measures are included in both the House and Senate versions of the financial overhaul legislation, and a final bill is scheduled to reach President Barack Obama for his signature this summer. [Washington Post]

[more]

The Obama Administration’s loan modification program isn’t addressing
the root of the foreclosure crisis, Laurie Goodman, senior managing
director at Amherst Securities Group, said in testimony to the House

Financial Services Committee today. She said the program is “destined
to fail” unless policymakers begin to address negative home equity by
requiring lenders to reduce the outstanding principal on underwater
borrowers’ home loans. Negative equity has become “a key predictor of
loan modification re-default, more so than unemployment or other
[factors],” Julia Gordon, senior policy council at the Center for

Responsible Lending, testified. House Financial Services Committee
chairman Barney Frank, said he recognizes the government’s failure to
halt the foreclosure crisis and will introduce legislation this week
that would provide unemployed homeowners with money to make mortgage
payments through a new federal program. The legislation will also
include a mortgage “cram-down” component that would allow federal
judges in bankruptcy court to overrule lenders by lengthening
homeowners’ mortgage terms, cutting their interest rates and reducing
their loan balances, Frank said. [Bloomberg]

Rising unemployment is causing the foreclosure crisis, which started with the relatively small subprime market, to expand to prime borrowers. That’s a much larger pool of homeowners, a sign that the foreclosure rate — more than 6,600 home foreclosure filings per day, according to the Center for Responsible Lending — isn’t likely to slow down in the near future. “People are no longer defaulting simply because of a change in the payment structure of their loan. They are defaulting because of lost jobs or reduced hours or pay,” said a September report by a Florida foreclosure task appointed by the state’s Supreme Court. Michael Barr, assistant secretary for financial institutions at the Treasury Department, said last month that more than six million families could lose their homes over the next three years.