February 15, 2008 Volume 109 Number 4

AFL-CIO backs mortgage reforms

Following the lead of the national AFL-CIO, Oregon’s state labor federation is joining consumer groups in pushing for state-level mortgage reforms to put a stop to lending practices that have put many homebuyers at risk.

At a Feb. 1 meeting of the Oregon Senate Commerce and Labor Committee, Oregon AFL-CIO Secretary-Treasurer Barbara Byrd testified in favor of Senate Bill 1090. SB 1090 would prohibit lenders from making home loans if they don’t think borrowers will be able to make payments. It would also put a one-year limit on pre-payment penalties, require that all fees, rates, and payment amounts be clearly disclosed, and ban loan fees of over 5 or 6 percent. Backers have a Web site — www.responsiblehomebuying.com — to explain the details. The bill is sponsored by Sen. Ben Westlund (D-Tumalo), a Democrat who is running for state treasurer.

But mortgage industry professionals packed the room, and protested that the reforms would put them out of business and curb lending to low-income home-buyers. By the following week, it looked like the bill was in trouble and would end up being watered down. In an amended bill, the loan fee cap was dropped.

No Republican has said they’d support the reforms, so the bill’s backers need Democrats solidly on board to pass the bill. Among Democrats reportedly opposed to the bill were Betsy Johnson in the Senate and Mike Schaufler in the House (where Democrats have only a one-vote lead.) Westlund, who began politics as a Republican, hopes to get some Republican votes for the bill.

Westlund aide Stacey Dycus said part of the problem is that lawmakers don’t have enough time to learn about the bill because it’s being introduced in a special 30-day experimental session. As of press time, the bill’s backers were still hopeful that they can get the votes to pass some mortgage reforms, just not all of them.

Still, leaders of the Oregon AFL-CIO expressed surprise that reforms would have any trouble given the current mortgage industry meltdown. The United States may be in the beginnings of a full-blown recession sparked by financial crisis in the mortgage industry. More than 12,000 Oregonians could face foreclosure in the next two-and-a-half years, according to the General Accounting Office. And nearly half of homeowners with adjustable rate mortgages are expecting to have to cut back on everyday expenses like groceries, clothing, and gasoline when their payments increase — according to an AFL-CIO-commissioned national survey by Peter D. Hart Research Associates.

“The goal should be home ownership and stability for homeowners in danger – not protecting the credit industry,” says Oregon AFL-CIO President Tom Chamberlain. “Lenders should be expected to offer consumers the loan that is best for the consumer, not the one loaded with the most fees and ‘pieces of the action’ for the lenders and paperwork processors.”


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