NEWS

Democrats Say Fairness for Homeowners Remains Focus for Senate

January 14, 2008

Legislation Introduced to Rein in Unlicensed Loan Originators.

(SALEM, Ore.) - The Senate Commerce Committee today introduced a key piece of the Senate Democratic Agenda for February: legislation that they say will dramatically strengthen state oversight of mortgage loan originators.

Later this week, the House Consumer Protection Committee will introduce a companion bill that will crackdown on fraudulent and abusive rescue-mortgage scams aimed at homeowners facing potential foreclosure.

"With the nontraditional mortgage market now collapsing, the most immediate need is making sure Oregonians who are facing the prospect of foreclosure do not get victimized a second time," said committee member and Senate Majority Leader Richard Devlin (D-Tualatin).

To prevent further victimization of homeowners, Senate Democrats have endorsed three specific foreclosure reforms to be enacted in the February session: protecting homeowners from scams that promise a "rescue" from foreclosure, but actually take further equity from homeowners; a new requirement that homeowners facing foreclosure be provided with clear and understandable language about their rights and options; and new regulation of loan originators, who are currently unlicensed and free to target distressed homeowners with unsuitable refinancing offers.

"Homeowners facing a foreclosure crisis need to be protected from scams," said Sen. Ben Westlund (D-Tumalo), chair of the Senate Commerce Committee. "We have an obligation to act."

The package of reforms being introduced by the House and Senate Committees this week follows efforts Senate Democrats made in early 2007 to get ahead of the mortgage meltdown in Oregon before it became front-page news. Senate Bill 965, which would have required sound underwriting standards for nontraditional loans, explicitly warned that:

"The recent increase in the use of nontraditional mortgage products has brought with it lending practices that have left many homeowners with loans they cannot afford to repay. With home prices falling in many areas of the country, and with millions of mortgage terms poised to reset, the national economy is threatened with the prospect of mass foreclosures. Oregon has not yet experienced the rapid rates of falling home prices and rising foreclosures seen throughout much of the nation, and there is still time to take effective action that will prevent thousands of Oregonians from entering into high-risk mortgages and facing unnecessary foreclosures in the future."

Unfortunately, during that unique window of opportunity for Oregon last spring, after the Senate passed SB 965, some in the lending industry took the mistaken position that our state would be immune from the problem and effectively ran out the clock in the waning days of session.

"The people who were telling us not to worry last year have a lot of explaining to do," said Devlin. "Now we’re dealing with the fallout of this crisis, and that fallout is having a real impact on real families in Oregon."