Concern Rises About Predatory Lending in Mortgage Industry

[Aug 15, 2007.]

Presidential candidate Hillary Rodham Clinton is expressing concerns about shady mortgage lenders who practice predatory lending. Senator Clinton is also requesting a $1 billion government fund that would enable homeowners to avoid the hardship of foreclosure.

Senator Clinton says that she doesn't oppose lending institutions, but she wants to ensure that consumers are not ripped off. She likens predatory lenders to snake oil salesmen who care little about consumers.

Senator Clinton has been outspoken in her criticism of subprime mortgages. Those are loans which are awarded to individuals with weak credit histories or modest incomes. Because of the current housing slump, a number of homeowners with subprime loans have had difficulty making their monthly payments. As a result, housing foreclosures are unfortunately on the rise.

Recently, American Home Mortgage Investment Corp., which is the country's 10th largest mortgage firm, filed for bankruptcy. Other lenders have said they will not be accepting new applications for mortgages. As a result of lower home prices and the rise in defaults, some investors are now leery of bonds that are backed by housing loans.

Meanwhile, Senator Clinton is proposing that lenders be required to stop early payment penalties which are assessed to some mortgages. In this way, Senator Clinton said, homeowners would be encouraged to pay their debts, rather than discouraged for doing so.

It's unclear at this point how long the current housing crisis will continue, although experts maintain that it is likely to persist well into next year. While the housing slump can have significant economic implications, the effects have not been quite so adverse as had been previously predicted. Still, given the number of housing properties now available, it appears to be a buyer's market. As a result, it is possible for prospective homebuyers to find some real deals available in various areas of the country.

Julie Ann Amos
August 15th 2007

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