December 14, 2007

CARDIN APPLAUDS SENATE PASSAGE OF FHA MODERNIZATION AS A FIRST STEP TOWARD HELPING HOMEOWNERS AVOID FORECLOSURES

WASHINGTON - U.S. Senator Benjamin L. Cardin, D-MD, addressed the Senate today on the growing crisis facing homeowners and lenders nationwide. His remarks came moments before the Senate voted overwhelmingly to make critical reforms to the Federal Housing Administration (FHA).

"I am encouraged by the Senate passage today of the FHA Modernization Act (S. 2338) . While this is just one part of a comprehensive solution to our current crisis, lower limits and lower downpayments through FHA loans will help reduce the number of homeowners who are caught up in subprime or non-traditional loans. It will do much to keep the American Dream of homeownership alive and well in Maryland and nationwide," Senator Cardin said after the 93-1 Senate vote.

"We thought when this started to happen that it would not spread to Maryland. After all, we have the United States government as a major employer. The housing markets in the Baltimore and Washington suburbs had values that were increasing at a very high rate, so we thought we would not face the prospect of many foreclosures. Well, we were wrong," Cardin told the Senate. "We had almost a 50% increase in delinquencies on subprime loans. The Center for Responsible Lending estimated between 2005 and 2006, approximately 186,000 subprime loans were issued in Maryland -- one-third of the total mortgages. And there is projected to be as many as 38,000 foreclosures in the state of Maryland."

"Homeownership has been the bedrock of America. It has been the American Dream. For the individual homeowners, the home represents, in most cases, their single largest asset," said Senator Cardin. "But for many people living in Maryland, for many people living in our country, homeownership has turned into a nightmare."  

"Most disturbingly, what we have learned from the circumstances in Maryland is that the hardest-hit communities are those with high populations of minority groups and the elderly," Senator Cardin said.  He noted with dismay that nationwide in 2005, about 54% of loans to African-American borrowers and 46% of loans to Latino borrowers were subprime. These statistics do not reflect lower credit scores or lower income. "Homeowners in similar circumstances with similar credit scores were much more likely to have subprime loans if they were not white -- three times more likely for African American applicants and almost three times more likely for Latino applicants," Senator Cardin said. "As part of a comprehensive solution to this national crisis, the predatory lending practices that target minority populations cannot be allowed to continue."