Clinton urges tougher rules for lenders
Sunday, 12 August 2007
Andrew Ward, Stephanie Kirchgaessner and Eoin Callan
CONCERN about turmoil in the credit market erupted on to the presidential campaign trail recently when Hillary Clinton called for tougher regulation of mortgage lenders and support for homeowners.
The frontrunner for the Democratic presidential nomination vowed to clamp down on "unfair lending practices" and create a $1.0bn (euro700m, £500m) federal fund to help homeowners avoid foreclosure.
The comments added to increasing political scrutiny of the mortgage industry amid soaring foreclosure rates and mounting distress in the credit markets.
Recently, American Home Mortgage Investment Corp, the 10th largest US mortgage lender, filed for bankruptcy protection and two other lenders said they were not accepting new applications.
Mrs Clinton said that fixing the broken mortgage market would be among the top priorities of Democratic lawmakers when Congress returns from its summer recess next month.
"We're going to try, in the Democratic Congress, to push forward on this agenda," she said in a speech in New Hampshire.
"We need to put an end to fly-by-night mortgage brokers peddling loans to unqualified applicants based on inflated appraisals. We need to help those facing the pain of foreclosure. We need to secure the market place and put reforms in place right now."
While Democrats are focusing in public on the need for tougher regulation, there is also increasing speculation in Washington about possible government support for the ailing subprime mortgage industry.
Steve O'Connor, senior vice-president for public policy at the Mortgage Bankers Association, which represents the real estate finance industry, said current market conditions would add "more momentum" for action when Congress returns.
He said there were hints in proposals offered by Mrs Clinton and New York Senator Chuck Schumer that Democratic lawmakers could favour a bail-out to help stem the crisis, but that such a proposal would be mired in difficulties.
"I think the notion of a bail-out can potentially be dangerous because you have to think of who you are bailing out and are you really helping who you intend to help?" Mr O'Connor said.
"A lot of loans going bad are held by speculators you can argue that you shouldn't be bailing out speculators."
One investment banking lobbyist in Washington said the idea of a bail-out had already been rejected on Capitol Hill, once lawmakers registered the exorbitant cost of such a move.
In her speech recently, Mrs Clinton proposed an expanded role for Fannie Mae and Freddie Mac, the government-sponsored mortgage companies.
"We have to expand them, because the numbers of people facing foreclosures are going up exponentially," she said.
"We should also have a billion-dollar fund in the federal government to support state programmes that help at-risk borrowers avoid foreclosure."
.....................................................................
Under syndication arrangement with FE
CONCERN about turmoil in the credit market erupted on to the presidential campaign trail recently when Hillary Clinton called for tougher regulation of mortgage lenders and support for homeowners.
The frontrunner for the Democratic presidential nomination vowed to clamp down on "unfair lending practices" and create a $1.0bn (euro700m, £500m) federal fund to help homeowners avoid foreclosure.
The comments added to increasing political scrutiny of the mortgage industry amid soaring foreclosure rates and mounting distress in the credit markets.
Recently, American Home Mortgage Investment Corp, the 10th largest US mortgage lender, filed for bankruptcy protection and two other lenders said they were not accepting new applications.
Mrs Clinton said that fixing the broken mortgage market would be among the top priorities of Democratic lawmakers when Congress returns from its summer recess next month.
"We're going to try, in the Democratic Congress, to push forward on this agenda," she said in a speech in New Hampshire.
"We need to put an end to fly-by-night mortgage brokers peddling loans to unqualified applicants based on inflated appraisals. We need to help those facing the pain of foreclosure. We need to secure the market place and put reforms in place right now."
While Democrats are focusing in public on the need for tougher regulation, there is also increasing speculation in Washington about possible government support for the ailing subprime mortgage industry.
Steve O'Connor, senior vice-president for public policy at the Mortgage Bankers Association, which represents the real estate finance industry, said current market conditions would add "more momentum" for action when Congress returns.
He said there were hints in proposals offered by Mrs Clinton and New York Senator Chuck Schumer that Democratic lawmakers could favour a bail-out to help stem the crisis, but that such a proposal would be mired in difficulties.
"I think the notion of a bail-out can potentially be dangerous because you have to think of who you are bailing out and are you really helping who you intend to help?" Mr O'Connor said.
"A lot of loans going bad are held by speculators you can argue that you shouldn't be bailing out speculators."
One investment banking lobbyist in Washington said the idea of a bail-out had already been rejected on Capitol Hill, once lawmakers registered the exorbitant cost of such a move.
In her speech recently, Mrs Clinton proposed an expanded role for Fannie Mae and Freddie Mac, the government-sponsored mortgage companies.
"We have to expand them, because the numbers of people facing foreclosures are going up exponentially," she said.
"We should also have a billion-dollar fund in the federal government to support state programmes that help at-risk borrowers avoid foreclosure."
.....................................................................
Under syndication arrangement with FE