Stronger Regulation of the U.S Mortgage Industry

July 2008, Good News! Congress has recently passed rules to protect future Home Buyers from deceptive practices in the Mortgage Lending Industry that fueled the foreclosure crisis. These regulations will go into effect in late 2009. Since this petition called for many of the rules that were passed, the author has chosen to close the petition.

To:  U.S Congress

We, the Citizens of the United States, demand stronger regulation of the Mortgage Lending Industry. Since 2007, millions of people in the U.S have foreclosed on their homes. These foreclosures not only affected the people who lost their homes, but the entire housing market. The glut of foreclosed properties on the market have driven down home values in neighborhoods across the country.

It is our belief that unethical practices in the Lending Industry have contributed to the worst housing market since the great depression.

Millions of Homeowners were steered into “risky” Adjustable Rate Mortgages (ARMs) with low teaser rates, instead of “safer” fixed rate Mortgages. ARM loans are more "risky" because the low payments are only temporary and “skyrocket” after the loan resets.

We believe the majority of these loans were signed under false pretenses. Many buyers were often unaware of several factors, which may have altered their decision if fully disclosed. A few are listed below:


1. Mortgage Brokers usually earn higher Commissions on “riskier” loans like ARMs. Buyers were mislead into thinking Brokers were acting in their best interest, when the opposite was true.

2. Negative Amortization can occur with ARM loans. Lower payments mean deferred interest tacked onto the balance of the Mortgage Loan. When this happens, the buyer is literally throwing money away, because nothing is applied to the principal.

3. Mortgage Brokers often made false promises to lure people into ARM loans.

▸ Buyers with less than perfect credit were told if they got ARM loans and made their payments on time, they would qualify for prime “fixed rate” loans in the future. A myriad of qualifications must be met before a Mortgage loan can be approved. No one can guarantee an approval without the actual application process.

▸ Mortgage brokers often told buyers that prepayment penalties would be waived if they refinanced with the same company (internal refinance) in the future. Buyers were not aware that loans are often prepackaged and sold like products. When this happens the original company has no more control over the loan.

4. Homeowners who take out home equity loans and “cash out” their equity through refinancing are often at risk of becoming “Upside Down” in their Mortgage Loan. Some Economists estimate that 15 million Americans could owe more than their home is worth by the end of 2008. The Mortgage Industry did little to warn homeowners of this risk.


We petition Congress to consider the following solutions:

1. Create and enforce an “Ethical Code of Conduct” for employees in the Mortgage Industry, similar to Standards set for Physicians and Accountants. Those who deceive and abuse their client’s trust must be penalized, suspended or have their license revoked.

2. Loan documents should be regulated by Congress. There should be guidelines set in place to protect buyers from loan fraud, excessive points, fees, etc.

3. In addition to “Truth in Lending” disclosures in Loan Contracts, buyers should be informed of the “risks” associated with each loan; similar to the medical industry’s standard to disclose “side effects” of medications. For example, buyers who opt for an ARM loan must be warned their payments will “skyrocket” after a certain date, if that is the case, etc.

4. Prohibit Subprime loans! Subprime buyers with low credit scores are frequently taken advantage of by predatory lenders. They are charged higher interest rates, excessive fees and high prepayment penalties. Subprime buyers often end up in foreclosure and are much better off without these dangerous loans. Force lenders to cap the interest rates, fees and points on these loans or prohibit them completely!

5. Require credit reporting agencies like Transunion, Experian and Equifax to offer “fast track” programs and one-on-one counseling for people who want to rebuild their credit. With higher credit scores, these buyers can qualify for affordable prime rate loans like everyone else.


We believe the solutions set forth in this petition will improve the U.S Economy and Housing Market.

Sincerely,

The Undersigned

The Stronger Regulation of the U.S Mortgage Industry Petition to U.S Congress was created by and written by Lisa Lashawn (email@AngryMobTshirts.com).  This petition is hosted here at www.PetitionOnline.com as a public service. There is no endorsement of this petition, express or implied, by Artifice, Inc. or our sponsors. For technical support please use our simple Petition Help form.