FORECLOSURE PREVENTION AND FHA REFORM RESOLUTION
WHEREAS, Mayors are committed to ensuring affordable housing opportunities for low and moderate income families and individuals, including the elderly and disabled, in our nation's cities; and
WHEREAS, homeownership is the most effective wealth-building tool available to average American families with the residential real estate assets in the United States now totaling $22.6 trillion; and
WHEREAS, homeownership is near its highest level in history with nearly 70% of the population purchasing their own homes in which many are first time home buyers; and
WHEREAS, adjustable rate mortgages (ARMs) -- accounting for one sixth of all lending -- and subprime loans have substantially increased over the last several years; and
WHEREAS, many homeowners are threatened with default and foreclosure as their subprime hybrid ARMs reset, resulting in significant payment shocks; and
WHEREAS, the rates of homeowners defaulting on home loans is increasing throughout the nation with 310,000 foreclosures in the 4th quarter of 2006, according to the Federal Reserve Board; and
WHEREAS, investors, homeowners, servicers, lenders, and communities all benefit when homeowners are able to avoid foreclosure; and
WHEREAS, many consumers have been subjected to predatory lending practices which resulted from mortgage fraud, deceptive marketing, improper federal oversight and/or a disincentive for mortgage brokers to represent the interests of the borrower; and
WHEREAS, the Federal Housing Administration (FHA) should play a key role in the expanding affordable homeownership opportunities for the low and moderate income families, the disabled and elderly, in our nation's cities; and
WHEREAS, the FHA has declined in influence in the mortgage market due to restrictions in its authority to develop innovative loan products, thereby providing an opening for scrupulous predatory lenders to make unfair loans because no sound FHA alternatives existed; and
WHEREAS, the FHA cannot compete with new subprime mortgage programs that lend to higher risk borrowers by providing flexible or zero rate down payments; and
WHEREAS, Senator Christopher Dodd, Chairman of the United States Senate Committee on Banking, Housing, and Urban Affairs, recently convened the Homeownership Preservation Summit where many of the leading mortgage lenders, counseling organizations and civil rights groups agreed on a wide range of principles to resolve loan default issues.
NOW, THEREFORE BE IT RESOLVED, that The U.S. Conference of Mayors, calls on Congress to adopt legislation that would regulate the mortgage lending industry, and on regulators to protect mortgage consumers from unfair practices, especially with respect to subprime loans that can lead to mortgage foreclosure;
BE IT RESOLVED, that the United States Conference of Mayors endorses the "Dodd principles" and calls on the mortgage industry and loan servicers to adhere and aggressively implement such principles agreed to at the Homeownership Preservation Summit including, but not limited to; contacting borrowers early and evaluating their mortgage; where appropriate, modifying the loan to help borrowers over the long-term by changing the term, reducing the principal, and/or reamortizing the loan; encouraging low-cost refinancing of mortgages; helping make credit more available through GSEs and the FHA; maximizing the number of successful mortgages saved from foreclosure while minimizing the impact on those borrowers who cannot prevent their loan from defaulting; dedicating resources and staff to provide help with new programs; and creating a system for tracking and measuring progress; and
BE IT FURTHER RESOLVED that cities, community organizations and key financial players should encourage borrowers in financial difficulty to seek assistance and advice to avoid foreclosure by contacting their lender or servicer or trusted intermediaries like non-profit home retention counselors supported by NeighborWorks, the homeownership preservation foundation and/or other United States Housing and Urban Development (HUD)-approved agencies.
BE IT FURTHER RESOLVED that Congress should enact legislation requiring the federal government to establish minimum licensing standards for mortgage brokers and that mortgage brokers should be required to be an agent of the borrower and to represent his or her best interests;
BE IT FURTHER RESOLVED that cities and the mortgage industry are encouraged to continue financial education initiatives that help citizens select the best mortgage product for their financial situation; and
BE IT FURTHER RESOLVED that the United States Conference of Mayors urges the Congress to pass legislation to reform the Federal Housing Administration by allowing them to offer viable refinance options for today's borrowers facing difficulty making mortgage payments and to be more competitive and innovative by providing low and moderate income consumers with sound mortgage options both in the prime and subprime markets; including but not limited to more flexible down payment options, higher loan limits and lengthened mortgage terms.