Merkley: A Better Road for Oregon's Homeowners

House passes mortgage prepayment ban
Portland Business Journal,2/21/08

One of the more contentious reforms sought by consumer groups represented on the state's mortgage work group has passed the Oregon House.

The house passed House Bill 3603-A by a 31 to 29 vote that stuck close to party lines. The bill would restrict prepayment penalties on subprime mortgages and require fuller disclosure in the subprime market.

Mortgage industry advocates fought the bill, with many arguing that prepayment penalties can help prevent buyers from flipping the homes by selling them to more vulnerable purchasers.

The bill now goes to the Oregon State Senate.

"Oregon homebuyers are the big winners here," House Speaker Jeff Merkley said in a statement. "This bill paves a much better road for Oregon's homeowners. By restricting prepayment penalties we're making sure the dream of homeownership doesn't become a nightmare."

The bill's backers have said that one in five home loans issued in 2005 and 2006 in Oregon was a subprime loan. Many of those loans will soon reset with much higher interest rates.

The bill also requires brokers to disclose if they're receiving a payment from a lender to steer borrowers into a specific loan.

Merkley, a U.S. Senate candidate, is also seeking measures that would strengthen underwriting standards to ensure that borrowers can repay a loan's full cost, as opposed to just meeting a teaser rate.

Posted February 22, 2008
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