Refinance Rip Off Artists Take Cynicism to Enron Levels

By Patty Wentz of Portland, Oregon. Patty is the communications director for Our Oregon.

"The subprime mortgage business is in tatters: loan volume is plummeting, defaults are rising and some of the biggest lenders have cut back or shut down." New York Times, June 1, 2007

"I feel bad that I was part of this. I feel like I was like one of the Enron people who ripped off the little guy," one former subprime mortgage loan officer told NPR last month.

We wrote about Senate Bill 965 the Friday before Memorial Day. Since then, there have been some new developments.

But first, meet Ira Cheatham of Portland. He's the real story behind Senate Bill 965, the Oregon Home Loan Fairness Act. He and his wife Hazel lost more than $22,000 in home equity and had to come up with a $7,5000 pre-payment penalty before he could get out of a refinance rip off that left him with a debt bomb of increasing interest rates and higher monthly payments.

"I really hope that something can be done so that what happened to us won't happen to other people," he says.

That's why we need SB 965. The Cheathams are African-American and research shows that African-Americans and Latinos are almost a third more likely to get a high-priced loan than white borrowers with the same credit scores. That was true in the Cheatham's case – their credit and employment record easily qualified them for a traditional loan with a lower interest rate and no pre-payment penalty.

The reality is that predatory mortgage lending is not about helping people get into first-time home loans they couldn't afford otherwise. Only 9 percent of the subprime loans issued between 1998 and 2006 went to first-time homebuyers. The subprime lending market has been overtaken by refinance rip off artists that have reduced overall homeownership.

Check out this story in the Wall Street Journal.

"Subprime mortgages and the brokers who peddle them are helping to take families out of homes in which they've lived for years."


Currently, SB 965 is going through the process in the House of Representatives. Unfortunately, the subprime mortgage industry is not letting the truth get in the way of their lobbying and are spreading the false rumor that SB 965 will shut down the industry in Oregon or – and this is ridiculous – mean that lenders would be liable for any future changes in a borrower's financial situation. It's just not true.

The reality is that even in states with the strongest anti-predatory lending laws (NM, NJ, NC, MA), subprime mortgages are widely available for people who may not qualify for a traditional loan and moreover cost less than or the same as subprime mortgages in states with only minimal protections. SB 965 will stop predatory mortgage lending, not subprime mortgage lending.

As a result of the lenders misinformation campaign, worried workers have been contacting the capitol after being misled into thinking they will lose their jobs if the bill passes.

It is the worst kind of manipulation. The lenders are pitting the workers against the borrowers when in fact it is predatory mortgage refinancing that's resulted in massive layoffs in a collapsing industry.

We can stop the subprime mortgage meltdown in Oregon, but we have to make our voices heard. We need your help. Go to this website, then pick up the phone and call your lawmaker at (800) 332-2313 right now!

  • (Show?)

    Sorry, but there are serious flaws in the bill and it isn't just spin. The legislation is poorly crafted and can literally put even someone who only notarizes a subprime loan approval in legal jeopardy.

  • (Show?)

    BTW... you need to properly format your closing blockquote tag. It is screwing up the layout of this thread.

  • Patty (unverified)

    ...can literally put even someone who only notarizes a subprime loan approval in legal jeopardy

    No it doesn't. If you can provide the language in the bill that you are belive has that effect, then we can provide some clarification.



    ps: Here's a summary of the bill.

  • Blue Dog Oregon (Jim) (unverified)

    It's a bad bill. There are real issues with the subprime industry that need fixing...but this bill is like using a nuclear warhead to fix a termite problem. It's overkill in the extreme. It creates personal (not just corporate) liabilities and regulatory red tape such that only the largest mortgage bankers with the deepest pockets and most expensive lobbyists will be able to be in the business...and it doesn't just affect the subprime business. It also affects brokers who do nontraditional mortgages...and their definition of "nontraditional" is such that about 70% of all mortgages done today (not just subprime) would be called nontraditional. The truth is, it will effectively shut many people out of qualifying for mortgages that can't qualify under traditional full-doc rules (like self-employed people).

    The bill is a total disaster and will hurt the people it's intended to help. It is government doing what it does best...addressing a problem by creating an even bigger one.

    And no, I'm not a mortgage broker.

  • joe12pack (unverified)

    Yet another idiotic attempt by government to save people from themselves. Caveat Emptor

  • Patty (unverified)

    Blue Dog - This may sound blunt, but Friend, you have been given bad information. If you can provide any language from the bill or the amendments to back up your case, we can debate it further.

  • (Show?)

    What is actually IN the bill? The posting doesn't have any content.

  • (Show?)

    Patty, I went to the two links you provided. With all due respect, they are utterly uninformative. Give us a bit more credit. All the links provide are "talking points" and more rhetoric.

    This is not a forum (I hope) for political recruitment, it's a forum for political discussion and debate. Can you please tell us what is actually in the bill?

  • Patty (unverified)


    As amended the bill will:

    • Require lenders to qualify borrowers based on how much the loan will cost after the introductory interest rates adjust to the higher rate.
    • Limit prepayment penalties to one year.
    • Exempt banks and credit unions from the bill; however, federal regulations that are already in place require these institutions follow similar standards.
    • Allow mortgage brokers to use approved automated software to meet the underwriting standards.


  • Logan Mitchell (unverified)

    Patty -

    You are truly ill informed on the impact of this issue. You made some pretty outstanding claims in your other thread back on the 25th - none of which were true regarding the people who are fighting this. Again, as a progressive, it saddens me to see someone spread false information to further their own agenda.

  • (Show?)

    haven't read through it yet, but i thought it might be useful to have a link to the actual bill in this thread.

    This is the actual text of Senate Bill 965. Enjoy.

  • Corri Klebaum (unverified)

    Here is a link to SB 965 with the proposed amendments.

    The definitions of lenders and nontraditional are seriously flawed, what shall be done will limit options for consumers and raise prices, and who may held accountable may not include the person who was ultimately responsible for the credit decision. This bill doesn't protect consumers it will hurt them. It's time to throw it out and start over.

  • David (unverified)

    Let's look at the actual language of the bill regarding automated underwriting software (emphasis mine):

    "The use of a qualified automated underwriting system to underwrite and approve a loan creates a rebuttable presumption that the lender has underwritten and approved the loan in compliance with the requirements of subsections (1) to (3) of this section."

    Being "rebuttable" means legally counterable, that the use of automated underwriting software won't protect any broker from the threat of personal liability for a borrower's financial situation within the next 3 years. It's not good enough for a broker to use an unbiased, federally regulated underwriting program; the state of Oregon needs to step in and do some indirect underwriting of its own.

    Let's consider a specific example. Joe Homebuyer wants to get a home loan for $200,000. He could get a traditional loan and spend around $1,230 on principle & interest each month. He could also get into an interest only loan where the payment is $1,083 for the first 10 years. Let's just assume that he qualifies for both, but the interest only option appeals to him because he plans on living there for only 4 years, and he'll stick the money he saves into an interest-bearing side account in the meantime. Why let the bank make interest on my principal when I can, he thinks.

    SB 965 says that Joe Homebuyer needs to qualify, the day he gets his loan, to make the year 11 payment on his interest only loan. Even though he's going to be paying $1,083 each month for the next 10 years (long after the 3 year window of this measure), he needs to afford to pay $1,490. If he didn't qualify at that higher rate and financial hardship befell him 2 years after he got his interest only mortgage, SB 965 allows him to sue the broker who set him up in the first place. His financial hardship wasn't due to a lack of disclosures or a suddenly increasing payment. In fact, his budget was easier BECAUSE he got into that interest only. But somehow, the mortgage broker can be held responsible.

    I'd love to hear how that makes sense.

  • poidog1909 (unverified)

    Probably old news to most, but the biggest of the sub prime scammer bandits was Roland Arnall. Is it any surprize to anyone that this preditory criminal that brought financial ruin to so many lifes is a good pal and one of the largest contributors to George Bush? His reward for being one of our nations worst criminals was being handed the ambassadorship to the Netherlands. Excuse the ranting, but I could just puke. I don't care how many right wing neo-cons try to defend or put a spin on this type of conduct so previlent in GW's administration. I am confident that history (that is if any of us survive this period)will regard this as the most blatantly corrupt empire civilization has ever seen and lay much of the blame on us citizens for doing so little to stop it. As much as I hate slogans, here's one: Impeach, Convict, Incarcerate, and Execute.

  • Patty (unverified)


    It's important to keep one important fact in mind: 27 states have implemented similar "ability to pay" underwriting standards for subprime mortgage lending, and the subprime market continues to thrive for non-traditional borrowers who don’t qualify for traditional loans but deserve to have access to fair and affordable credit, while abusive practices have been severely curtailed. This is good legislation.

    To your scenario: It could not happen under SB 965. Joe Homeowner would not be able to blame his future financial troubles on Fred Lender under SB 965.

    SB 965 does not require lenders to predict the future. It requires them to do follow the law on loan origination day. That's it. It sets underwriting standards that look at the financial statement of the borrower on the day the loan is issued as it relates to the entire life of the loan.

    For example, can the borrower afford the $800 per month that the loan costs now when the interest rate is low? Great, move forward. Can the borrower afford the $1,200 per month the loan will cost when the interest rate increases? Great, move forward.

    Unfortunately, abusive lenders have been underwriting loans based on the initial low interest rates and low payments and not the later, more expensive payments. That's contributed greatly to home loss and foreclosure.

    The 3-year time frame you mention is, in reality, a statute of limitations. If a bad lender breaks the law on loan origination day, the borrower has only 3 years to take action about the events that occurred on loan origination day. That's it.

    Also, the presented explanation of rebuttal presumption as relating to the underwriting standards is not correct.

    This is correct: the rebuttable presumption is the presumption that the lender has followed the law and followed it correctly. This means that the burden of proof shifts to whoever says the law wasn't followed correctly. It puts the lenders one step ahead in a dispute. It means that the lender would not have to prove that he or she followed the underwriting regulations – the borrower would have to prove (or rebut) that they didn't.

    Here are some other examples of rebuttable presumption: When banks follow particular laws outlining safety precautions such as types of lighting and absence of obstructions for a certain number of feet around ATM machines, there is a rebuttable presumption that the bank has provided adequate measures for the safety of users of the ATM, meaning that a person who wishes to take action against the bank because they were robbed because it was so dark has to prove that the safety measures were not adequate – the bank does not have to prove that they were adequate.

    Another example: there is rebuttable presumption that in a married couple, the husband is the father of any children the wife bears. He does not have to prove that he is. If someone were to try to challenge it, the burden would be on them.

    So again, this provision shifts the burden of proof away from Fred Lender and toward Joe Homeowner.

    I apologize for the length of the post. I hope this is helpful.



  • (Show?)


    How come the Mortgage Brokers are getting notified by their Bonding companies that if this bill passes in its present form their bonds will be cancelled? If this bill does what you say it does, why is it Banks and Credit Unions are exempted? In some Oregon markets banks and credit unions provide as much as 80% of the residential financing. That means Banks and Credit unions could provide the services and the products you want to curtail with no worry of any oversight by the citizens of Oregon or their elected and appointed leaders.

    The heart of the bill is in the right place, but the nuances of its applications hurts the working man and woman that wants to own a home and thrive with the economy they live in. What you and the other mis informed supports are working for is sheer disaster for the very men and women that progressive Oregonians have been trying to up lift.

  • Rebel Dog (unverified)

    You know, being a jerk is not a lifestyle choice. You don't have to give everyone equal consideration just because they breathe.

    We have a lot of business now, that, in a progressive society would not exist. From elective plastic surgery to the self sustaining military industrial complex, there's very little in the economy that could be called delivering value for money. Little that isn't out and out fraud.

    Bottom line, yes it is very severe regulation. Rather than whine, they should be grateful they are allowed to make their living loaning money to folks that, by definition, cannot afford it and have a history of using it to ruin their lives.

    It's also, arguably, the single largest factor controlling people's political and moral decisions. If everyone's in debt and engaged in some kind of fraud, it's easier to sell the government violating international law, and all the constant shuck and jive we're supposed to think is business as usual.

  • David (unverified)


    I appreciate your response, but I still disagree with your stance. The fact that you believe my example scenario would never happen suggests to me you haven't read the bill closely enough, because it's spelled out clearly:

    "A lender that offers or originates a nontraditional mortgage product shall analyze a borrower's repayment capacity, including an evaluation of the ability to repay the debt by final maturity at the fully indexed rate, assuming a fully amortizing repayment schedule."

    The bill includes interest only under its definition of nontraditional. Interest only becomes fully amortizing at year 11, as I stated in my example. According to this bill, yes, Joe Homeowner would need to have the ability to make that year 11 payment. There's a discrepancy between what you're saying and what's actually in the bill, and I'm going to go with what the bill says, since that's what would become law. If you want to convince me otherwise, you'll have to provide the language in the bill that says so.

    I must also take issue with your insistence that this bill about subprime lending. It's not. The term "subprime" isn't even in the bill, which makes me wonder how closely you've read it. SB 965 is very clearly about non-traditional lending, which is not interchangeable with subprime lending.

    Subprime is the practice of offering loans to high-risk consumers with low credit scores or a lack of credit history and making up for that increased risk of foreclosure with substantially increased fees and interest rates. It's possible to have a 30-year fixed-rate mortgage (read: traditional) that is subprime.

    Non-traditional is, as this bill defines, any loan that does not follow the traditional fixed-rate scenario or does not rely on full documentation of income and assets. A self-employed borrower with a credit score of 780 getting into a 30-year-fixed mortgage would get a non-traditional loan. Someone who CHOOSES to get into an ARM or an interest-only because it benefits them would be getting a non-traditional loan. The vast majority of people getting non-traditional loans are NOT subprime.

    You keep talking about subprime when the bill is about nontraditional mortgage products, and then you accuse your opponents of having a misinformation campaign. Pot, meet the kettle.

  • Silence Dogood (unverified)

    Under the proposal, if any existing loan companies shut their doors, state Unemployment and DMV offices will be able to offer the same loans that are being outlawed, so nobody will be harmed. I read about it, here, in The Oregonion.

  • fairlady (unverified)


    I am a small broker who helps people make good decisions. That doesn't always mean that people will make a good decision for themselves. One of my concerns with this bill is that even though, as you say, the burden of proof might be on the consumer if they find themselves in financial jeopardy in 2 years it won't stop them from suing me and hoping for some sort of settlement. I cannot afford to defend myself in an expensive lawsuit even if I have not done anything wrong. That is why some people like me will simply go out of business and not renew a brokers license if this bill goes through. It concerns me that people like you, who clearly do not know anything about the mortgage business, are trying to legislate it. I find myself wondering who is behind you, and what do you have to gain? Again, in the end, if this goes through you will only hurt those people you think you are trying to help.

  • Ted Janusz (unverified)

    The Top 10 Mistakes Mortgage Borrowers Make

    "Given how easy it is to get skinned on a mortgage deal, it's amazing anyone ever buys a home," says Liz Pulliam Weston, personal finance columnist for MSN Money.

    "But buy we do -- and then refinance, and refinance again. Our ignorance of how the mortgage process works and the many ways mortgage pros rig the system in their favor lead many of us to pay far more than we should."

    Taking Ms. Weston's comments into consideration, here is the key information from a former senior loan officer that mortgage lenders don't want borrowers to know:

    1. Not knowing which mortgage fees the borrower can -- and cannot -- negotiate. Or how the lender actually makes money on you. Without this understanding, a smooth operator could bilk you out of thousands of extra dollars . . . in mere seconds, since you don't actually write a check for these costs. Remember, the loan officer is different from your friendly bank teller. The bank teller is probably paid a salary to be courteous and helpful. The loan officer's job is to make money and is probably paid on commission.

    2. Choosing and trusting the first loan officer the borrower interviews. Just like you probably wouldn't say yes if someone asked you to marry them on your first date. You are looking at a commitment here of the largest single investment you will ever make. In fact, it will probably last longer than most marriages!

    3. Using an interest-only or "payment option" adjustable-rate loan primarily to qualify for a more expensive house than you could normally afford. In the current market of slowing appreciation and falling prices, such a loan could leave you with a mortgage balance that could be more than the value of your home. And if the payment adjusts from a below-market teaser rate, you may be paying hundreds or even thousands of dollars more per month or may even no longer be able to afford the mortgage. You may be looking at a foreclosure and the loss of your biggest investment.

    4. Thinking the interest rate is always the main thing. Most so-called astute mortgage shoppers think they should call around to shop rates. And rate envy is common, especially among male borrowers. But what closing costs will you need to pay to get that fabulous advertised rate? Do comparison shopping not just on the interest rate but on all of the loan costs.

    5. Not comparing the final fees listed on the closing documents to the up-front estimates to avoid the lender <color=red>packing</color> the loan with added-on fees without the borrower's knowledge. It is relatively easy for the lender to do this because there will be a ream of forms that you will need to examine and sign at closing. A deceitful closing agent may also use various tactics to distract you from the inflated figures so you won't even notice.

    6. Not knowing if the mortgage has a pre-payment penalty - until it's too late. Else you could find yourself in a Catch-22: You may need to refinance the mortgage so you can afford the monthly payment, but you may not be able to afford the prepayment penalty to allow you to refinance!

    7. Thinking that renting is always just throwing money away. At least in the short run, it can cost thousands less to rent. For instance, don't buy a starter house. If you will be living in the area for less than five years or are unsure of how long you will be in your current job or marital status, you could potentially save thousands by staying in your apartment. Closing costs alone on a house (if you negotiate properly) may be $1,500 to $2,500. You may also be looking at a Realtor fee to sell your house of 6%. On a $200,000 house that's an additional $12,000. And the moving van hasn't even pulled up to your door yet!

    8. The borrower does not know if he or she is paying a back-end yield spread or Service Release Premium. These are fees paid to brokers and loan officers (the "kickback") for upselling the interest rate to borrowers.

    9. Paying for mortgage life insurance, credit insurance or other expensive lender add-ons to increase the amount of kickbacks the lender can receive from various vendors.

    10. Paying hundreds of dollars to have a company set up a biweekly mortgage payment plan, something the borrower can generally do for herself or himself -- for free.

    From Kickback: Confessions of a Mortgage Salesman, one of the best-selling books on mortgages on

  • (Show?)

    Posted by: David | Jun 8, 2007 8:56:39 AM

    More importantly, this bill excludes by explicelt exmeption, banks, and most shockingly, Credit Unions. This makes Credit Unions offering sub-primes completely untouchable by either State or Federal oversight. Way to go OurOregon.

  • (Show?)

    Posted by: David | Jun 8, 2007 8:56:39 AM

    More importantly, this bill excludes by explicelt exmeption, banks, and most shockingly, Credit Unions. This makes Credit Unions offering sub-primes completely untouchable by either State or Federal oversight. Way to go OurOregon.

  • (Show?)

    Posted by: David | Jun 8, 2007 8:56:39 AM

    More importantly, this bill excludes by explicelt exmeption, banks, and most shockingly, Credit Unions. This makes Credit Unions offering sub-primes completely untouchable by either State or Federal oversight. Way to go OurOregon.

  • (Show?)

    Sorry for the triple post there... BlueOregon kept giving time-out errors when I was trying to type in the verification code to post the comment.

  • Eric Wiley (unverified)


    There is an unfortunate amount of misinformation floating around about Oregon Senate Bill 965, and therefore a lot of uninformed. SB 965 does indeed miss the mark when compared against its intended purposes. SB 965 was initially identified as a predatory lending bill and in its early stages was constructed as such. The version that was quickly amended at the last minute and put forth to the Oregon Senate for a floor vote was the 965-5 version, which tossed the previous predatory lending angle and instead morphed into so much more. Unfortunately, this fact wasn't well communicated to the members of the Oregon Senate. They thought they were passing a work-in-progress predatory lending bill to the Representatives for a good deal of tweaking and re-working. That didn't happen.

    If SB 965 passes the House of Representatives, which it is in line to do in the next few weeks unless consumer and industry attention to the bill can derail it in time, it will become law soon. This has the potential to be one of the biggest mistakes the Oregon legislature may make in a long time.

    The "emergency" nature of the bill means that it would be effective upon passage. However, given that no mortgage broker or mortgage lender will have met the stringent requirements of the bill at the time of passage (if they even can, since the requirements are so restrictive) lenders are already indicating that they may cease doing business in Oregon until such time that they can accommodate the requirements of the bill - if they can ever meet the requirements. The Surety and Fidelity Association of America is also reviewing the bill and is concerned about the requirements and liability components of the bill from a bonding perspective. The Mortgage Bankers Association is concerned that mortgage loans originated for Oregon properties would not be eligible for purchase on the secondary market (translation – they wouldn’t be liquid as they are today) until the risk factors associated with lending in Oregon are both understood and mitigated, which is in question.

    Industry insiders know that SB 965 is overreaching and contains requirements that can't be met in a practical sense, yet it would seem that this reality hasn't set in with those that are not directly industry experts, such as Oregon's legislators, consumer protection groups and regulators. Particularly, given the wide definition of "non-traditional" in section 2.7, and then considering the requirements of lenders (by definition to include mortgage brokers) in sections 4, 5 and 6, when combined with the enforcement provisions in sections 11 - 13 (particularly 13, where anyone that "knowingly aids or abets" in the transaction is included into personal liability on all covered transactions) make this bill, if converted to law, the most burdensome and restrictive mortgage lending legislation in the union.

    To state that the "rebuttable presumption" component of section 4.4, the section that kind of adds a carve-out for the use of a qualified automated underwriting system, holds any weight is a farce, one easily argued in the court of law by an attorney. Multiple attorneys have indicated such. Additionally, section 4.5, without explicitly coming out and saying so, eliminates loan choices for consumers by requiring that anything less than fully documented income and assets would be a violation of the provisions of this proposed legislation – “The analysis of repayment capacity may not use credit scores as a substitute……” There goes the qualified automated underwriting system carve-out, because most Fannie Mae and Freddie Mac approvals result in a limited documentation underwriting analysis and findings.

    The current intended purpose of the bill (as identified by those legislators and consumer groups backing the bill) is to adopt, by Oregon statute, the Interagency Guidance on Nontraditional Mortgage Product Risks issued October 4, 2006 by the OCC, FRB, FDIC, OTS and NCUA. The State of Oregon has already adopted the subsequent and very similar CSBS/AARMR (Conference of State Bank Supervisors/American Association of Residential Mortgage Regulators) guidelines in January of this year. However, and here is the kicker, the guidance itself, in present form, really can't be adopted into statute. Therefore, it has been modified in SB 965 to be made into "statute" worthy form, and the result is that SB 965 doesn't mirror the original federal guidance at all.

    The reasons include:

    1. The guidance at the federal level was issued to federally regulated institutions not as predatory lending guidance, per se, but rather as a risk mitigation measure for the solvency of the federally insured banking and mortgage lending institutions. The regulators want to make sure that banks didn't have too many risky loans in their portfolios. They want to make sure that banks have strong risk mitigation in what types of products they offer, service, etc. Consumer disclosure is both to protect the consumer as well as the lender (an informed consumer is less likely to default later because they will have known what they were getting into before signing on the dotted line).

    2. The states, not finding that every lending institution was directly overseen by the federal regulators, adopted the guidance at the bequest of the CSBS/AARMR group. After having interaction with some regulators in Oregon, Idaho and Washington, it is apparent that those regulators didn't really know what it was that they were adopting - they were pushed into it, but it wasn't that big of a deal, because the guidance that the states adopted is very similar to the guidance that the feds issued.

    3. The "subprime meltdown" occurs, starting in February of this year, at least from a public and news media perspective. In reality it started a year or more earlier, but many big mortgage lenders didn't react like they should have, and so they started making the news and going out of business in earnest this year. Many of them did, in fact, have lending practices that were too risky, and there were in fact some homeowners that suffered.

    These lenders weren't ready for a rapid deterioration in the marketplace for the loans that they were bringing to the market. However, the market corrected itself in a big way and still continues to do so today. For those lenders still able to offer mortgage loans (the number is far fewer than just 6 months or a year ago, particularly concerning lenders specializing in subprime loans) guidelines have been curtailed across all levels of loan products, from Prime to SubPrime, and loan file reviews have been made to be much more strict in scrutiny. Every "i" is now required to be dotted and every "t" crossed, with no margin for error, no matter the loan type or how relevant the topic. The secondary market is requiring this, even of the largest mortgage companies.

    1. Special interest groups, some local to Oregon and some operating on a national basis, seized the opportunity of a "perfect storm" and struck while the going was good. They started feeding off the media frenzy and infused legislators with the idea that predatory subprime lending had to be stopped in Oregon before a real problem was realized. And they met with success since neither the special interest groups nor the legislators, or even the state level regulators, are actually knowledgeable on the intricate inter-workings of the mortgage marketplace, particularly what is called the secondary market. Never mind that the market was correcting itself and continues to do so.

    Oregon does not have a foreclosure problem at this time, and likely never will (unless SB 965 passes and it becomes very difficult to achieve mortgage financing for purchase and refinance transactions, resulting in a dramatic drop in home values and an increase in foreclosures, which will cause a negative cascading effect on the market). In Oregon in 2006, only 1 in 152 homes (only 0.7%) suffered foreclosure, which is well within tolerance of what the market can and should bear. Nationally that number was 1 in 92. High risk states, such as Colorado, which was unfortunately at the top of the list, had as high as 1 in 33 homes foreclosed upon in 2006 - a vast difference.

    1. Oregon’s Governor wants a predatory lending bill on his desk by the end of the legislative session. This is big political pressure and it is being felt by the legislative body, who is doing everything they can to help produce this result. Thankfully, even many of our legislators are starting to toss aside political affiliations and realize that SB 965 is much more complicated and more dangerous than it was originally purported to be.

    The desire to protect consumers from predatory lending practices is a noble and worthy cause, but SB 965 isn’t the answer. If made into law, SB 965 has the very real likelihood of causing exactly what it is meant to protect against, more foreclosures within Oregon’s borders and a terribly damaging effect on Oregon’s overall economy. This is not just simply the opinion of a local Oregonian who also happens to be in the mortgage business, but rather the opinion of the Mortgage Bankers Association as evidenced by a recent memorandum issued in opposition of SB 965. Of note is the fact that the MBA's members are for the most part federally chartered institutions (i.e. the big national banks) and are pre-empted on a federal basis from Oregon specific legislation and regulation.

    I hope that the Governor and Oregon’s legislature comes to understand the true, undesired ramifications of this bill in time to do something about it – and that is to kill SB 965. Let's work on a better and true predatory lending bill for the next legislative session. I, for one, will actively participate in that process.

    Thank you.

    Eric Wiley

  • David (unverified)


    Thank you for pointing out that the market is continuing to correct itself. It seems the bill supporters are largely unaware of this. Here's a very current example of how the mortgage industry regulates itself. On July 22nd, Fannie Mae is updating its Desktop Underwriter software to version 5.7, and one of the changes reported involves tighter qualification standards for an interest only loan:

    “With Version 5.7, when calculating the PITI for loan casefiles with the IO [interest only] feature, in addition to the taxes and insurance payments, DU will use the full principal and interest payment at the note rate for fixed-rate mortgages and will use the full principal and interest payment at the fully indexed rate (index + margin when provided) for adjustable-rate mortgages.”

    This change (there is also a similar one for negatively amortizing ARMs) is designed to help the borrower and the investor alike by reducing the possibility of foreclosure, and it will work whereas the measures proposed in SB 965 will not. Why? Because it’s universal.

    Since this qualification standard is being implemented by Fannie Mae into their automated underwriting software, it will affect all loan originators nationwide who use their software to underwrite a loan, regardless of whether they work for a broker, a bank, or a credit union. Because this change is universally applied, it will ensure a level playing field between originators—something that SB 965, which targets only Oregon brokers and not banks or credit unions, will NOT do.

    The arguments against this bill are supported by facts about the way this industry really works. From what I understand, the legislators are beginning to listen--which is a good thing for ALL of us, homeowners in particular.

  • J. Prat (unverified)

    The brokers are selling the loans to.... BANKS. The Banks buy the loans under the Bank's guidelines. I have never heard of a broker foreclosing on a property. It is the Banks that foreclose on loans. The Banks bought the loan according to the Bank's guidelines. WHY would the Banks be exempt from this law? Is it no wonder the co-writer of the bill is on the board of directors of a credit union?

  • Shawn (unverified)

    Definitely subprime lending is hurting the mortgage lifestyle of people. For those who have terrible credit scores now, you may settle for refinance mortgage loans bad credit so you can restructure your loan and rebuild your credit rating.

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