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“Overactivism” is a Beautiful Phrase

In Consumerism, Economic Justice, Housing, Land rights, Urban Planning / Space, US Politics on March 8, 2007 at 4:26 pm

“Overactivism” is a beautiful phrase that is being lobbed from the lobbyists towards consumer advocates, fair lending advocates, and economic justice activists becausethe “subprime” or “nonprime” mortgage market.  Subprime loans are made to borrowers with lower than average credit; the loans, largely due to historical barriers to credit, are made disproportianatly to low-income, non-white, and female borrowers.

 

The subprime lending market has made years of irresponsible and predatory mortgage loans to these borrowers and now the cat is out of the bag beyond the activist community — the loans are unsuitable and unaffordable to many borrowers. The Center for Responsible Lending estimates that 20%, or one of every five, subprime loan made in recent years will end in foreclosure, a process thta not only causes the homeowner to lose their home, but also causes neighborhood instability in terms of abandonment and gentrification.

 

The “overactivism” they refer to is the push by these advocates and activists to ensure that common sense regulations are in place requiring lenders to simple ensure that loans are suitable and affordable to the borrower through the life of the loan.

Countrywide, the biggest U.S. mortgage lender, originated $468.2 billion in home loans last year, including $40.6 billion in “nonprime” products to the riskiest borrowers. Regulators, including the Federal Reserve and the Office of the Comptroller of the Currency, on Friday issued proposed guidance to encourage tighter standards by lenders facing a sudden surge in delinquencies. Loan quality is falling because borrowers, perhaps ill-informed about how fast and far their payments can rise on a 2-28 loan, sustain a “payment shock” and can no longer meet the obligation, the regulators said.

But Countrywide and industry lobbying groups, including the Mortgage Bankers Association, said the guidance would restrict lending to the portion of the economy that need it most… Half of the hybrid ARMs issued by Countrywide are for purchasing a home, he said. Half of those borrowers refinance into prime loans, showing that customers are improving their credit scores and not “hitting the end of the road,” he said.

“The worst thing would be over-activism,” Sieracki said. “There is a market here that needs to be served.”

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