Jeff Merkley Introduces Two Bills To Outlaw Abusive Mortgage Practices

One of the many outstanding attributes that attracted Blue America to Jeff Merkley was his absolute and unswerving dedication to the interests of ordinary working families. It's why we endorsed him, why we raised campaign money for him and it's why we feel he was our best ever Senate pick-- kind of the polar opposite of Alaska sell-out Mark Begich who took our contributions and ran right to the Bayh anti-Obama bloc and has now amassed voting record way at the bottom of the barrel, right down there with arch-reactionaries Ben Nelson (NE), Kay Hagan (NC), Max Baucus (MT), Michael Bennet (CO) and Mary Landrieu, one of the half dozen Democrats who crosses the aisle to vote with the Republicans on special interest legislation most frequently.

Merkley, on the other hand, currently has the second most progressive voting record in the Senate (after placeholder Ed Kaufman)-- right up there with Bernie Sanders (I-VT), Sherrod Brown (D-OH), Jack Reed (D-RI), Sheldon Whitehouse (D-IL) and Dick Durban (D-IL), the senators most willing to take on the special interests and battle on behalf of working families. On crucial votes Merkley scored a 96.67. Begich has an embarrassing 63.33.

Anyway, one of the aspects of Merkely's approach we particularly liked was how dogged he was all through the campaign about reforming the abusive mortgage lending industry. And now that he's in a position to do something about it, he's been working hard towards those ends. A vociferous backer of Durbin's legislation to allow bankruptcy judges to alter mortgage agreements to keep families in their homes, yesterday Merkley introduced two solid bills that are a clear vision of what a progressive perspective is when it comes to fairness in the country's housing policies and agenda. The bills seek to ban abusive practices that have led to millions of foreclosures: secret steering payments to brokers who lead homeowners into deceptive mortgages that they can't afford and prepayment penalties designed to prevent homeowners from refinancing into more affordable loans. Jeff:

“Irresponsible lending practices like secret steering payments and prepayment penalties have turned home mortgages into a scam. These deceptive practices have had devastating consequences. Approximately 20,000 Oregon families will lose their homes to foreclosure this year and millions more foreclosures are expected across the country. The bills I am introducing today will
help families feel confident they are receiving a fair deal when applying for a mortgage... Instead of fulfilling a dream and contributing to a secure financial future, home mortgages have become a vehicle for stripping wealth from working Americans. This new legislation will restore transparency to the mortgage lending process and help make home ownership a stable investment for families once again.”

The problem is that these deceptive lending practices, which have created a ripple effect that has created an economic meltdown, are extremely profitable. And those who are profiting most are sharing their ill-gotten gains with many of Merkley's colleagues. The finance/insurance/real estate sector has put more money into lobbying and direct payoff to members of Congress than any other sector-- $2.2 billion into direct payoffs in the form of campaign "contributions" since 1990 and another $3,557,011,255 in lobbying, just since 1998! It's no coincidence that some of the most insistent defenders of the banksters are among that senators who have profited most generously from the sector. Merkley can expect major opposition led by half a dozen of the most corrupt members of the Senate including the newest "Democrat," Arlen Specter who has pocketed $5,753,310. And every bit as determine d to protect the banksters as Specter are obstructionist fanatics Mitch McConnell (R-KY- $5,013,778), Lamar Alexander (R-TN- $4,847,225), Kay Bailey Hutchison (R-TX- $4,685,238), Max Baucus (D-MT- $4,633,243) and Richard Shelby (R-AL- $4,384,492). These six are walking, talking advertisements for serious campaign finance reform. Every lobbyist in Washington knows these are among the most corrupt members of the Senate whose votes are always for sale, regardless of how badly they hurt their constituents-- for whom they have no respect and no regard.

Under their current rules, mortgage lenders have been allowed to purposefully steer families into bad
loans, even when they qualify for loans under affordable terms. This practice has significantly contributed to the current mortgage crisis. A study for the Wall Street Journal found that 61% of the subprime loans originated in 2006 went to families who qualified for normal prime loans.  Nationwide, an estimated 2 million families will lose their homes this year and up to 10 million over the next four years.

While Congress tries to pass new legislation to address the mortgage crisis, like the bills Merkley and Durbin have introduced, the Obama Administration is moving ahead with its own plans. Yesterday they unveiled an expansion of their $75 billion foreclosure prevention plan that will provide new subsidies to mortgage lenders and investors in order to stem the rising tide of foreclosures.

Under the expanded plan, some homeowners could see their payments fall significantly and the interest rate on their second mortgage pushed down to 1 percent. The announcement comes nearly two months after the administration launched the housing program, called Making Home Affordable. While officials said some borrowers have already received help, the foreclosure rate is rising and it could be months before the program begins to have an impact.

The new efforts address, in part, criticisms from consumer advocates that the administration's housing plan did not go far enough and that borrowers still face too many barriers to receiving help.

"Ensuring that responsible homeowners can afford to stay in their homes is critical to stabilizing the housing market, which is in turn critical to stabilizing our financial system overall. Every step we take forward is done with that imperative in mind," Treasury Secretary Timothy F. Geithner said in a statement.

The administration's housing plan pays lenders to help borrowers stay in their homes by modifying their mortgages to an affordable level. But, the plan as first announced in February applied only to primary mortgages. Now, lenders will be eligible for payments when they modify the terms of a second mortgage, including a home-equity line.

About 50 percent of at-risk borrowers have a second mortgage, which can make it difficult for them to afford their homes even after payments are cut on their primary mortgages. Second mortgages were popular during the housing boom for buyers who could not afford big down payments.