Merkley Backs ‘Responsible Homebuying Act’

Oregon House Speaker Jeff Merkley (D-Portland) testified before the Senate Commerce and Labor Committee today in support of a SB 1090, the Responsible Homebuying Act. The bill will aid families in the subprime mortgage market.

“The financial strength of a family is built on three pillars – a living wage job, a good education, and homeownership,” Merkley told the committee. “With the economy turning downward in Oregon and across the country, all of those pillars are under assault, and homeowners are bearing the worst of it.”

In Oregon in 2005 and 2006, one out of every five home loans issued in Oregon was a sub-prime loan. Nationally, nearly 90 percent of sub-prime home loans are adjustable rate mortgages. For many families, those loans are beginning to present a real problem.

“Lenders have a responsibility to provide borrowers with a well-paved road to successful homeownership,” Merkley said. “That means we have to fill the potholes – like prepayment penalties – that throw homeowners off course.”

Merkley told the Senate committee that there are a number of problems with the way mortgages are written in Oregon. He said that right away, the legislature should act on four main areas on concern:

*Require lenders offer borrowers the lowest-cost, fixed-rate loan for which they qualify

*Ban prepayment penalties after the first year of a mortgage

*As a first step, require brokers to fully disclose on their Good Faith Estimate any incentives or other contributions they receive from lenders

*Require lenders to verify a borrower’s ability to repay the full cost of the loan, not just the teaser rate

The Oregon House Consumer Protection Committee is currently considering a bill to eliminate “rescue mortgage” scams. Merkley said that legislation was incredibly important for homeowners who are already locked into their mortgages. But to fully address the issue, Merkley said that the legislature must make sure the same problems don’t happen again.

“Families who are buying a home deserve a level playing field. Buying a home, especially for the first time, can be overwhelming,” Merkley said. “Right now, unscrupulous lenders are stacking the deck against borrowers, and the results are devastating. The legislature must step in on the side of working families in Oregon.”

Committee Chair Sen. Ben Westlund (D-Tumalo) thanked Merkley for his recent work on the mortgage lending crisis and noted Merkley’s long history and expertise in housing issues. Merkley and Westlund previously worked together to create Individual Development Accounts, which allow low-income families to save to start a small business, buy a home, or go back to school. Merkley is a former executive director of Portland Habitat for Humanity and director of housing at Human Solutions in Portland.

The committee is expected to approve the bill on Monday.

Posted February 8, 2008
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