Obama's Subprime Lending Views in 2000

I'm reposting this because it's important to know that Obama has had foresight on the issue of subprime lending, as well as credit card matters. He's the only one who's ever fought for the poor and middle class, taking a line from Palin. 

Senator seeks new rules
by Kyriaki Venetis
September 22, 2000
Origination News

Chicago -- State Senator Barack Obama, D-Chicago, recently sent a formal letter urging Governor George Ryan to reject predatory lending proposals jointly drawn up by the state's Office of Banks and Real Estate, and the Department of Financial Institutions.

This came shortly before an Aug. 10 meeting in which the senator and several other members of the state's legislature met with the governor to discuss the issues face-to-face.

In the letter, Senator Obama advised the governor "to ask the OBRE and DFI to go back to the drawing board and design rules that would define high cost loans appropriately."
He stated that "high cost loans should be defined as those with points and fees of four percent of the total loan amount or more, or with an interest rate exceeding a comparable-term Treasury rate, plus five percentage points. Also points and fees should include all fees paid to brokers by either the borrower or lender, as well as any payment penalties on the existing loan."Beyond that, he argues the regulations should include the following prohibitions:

* No financing of points and fees into the loan.

* No lending without verified and documented sources of income, such as tax returns or credit reports.

* No lending in which the total household debt payments, not merely mortgage costs, exceed 45% of the applicant's verified and documented income.

* No prepayment penalties.

* No balloon payments, except on open-ended junior mortgages.

* No lump sum financed credit life or disability insurance.

* No mandatory arbitration clause.

* No refinancing within two years of an existing loan, unless the annual percentage rate of the new loan is at least two percentage points below the APR of that loan.

* For any refinancing within (the first) two years of an existing loan, lenders may charge point and fees only on the increase on the amount of the new advance.

The senator believes that these inclusions will help reduce the number of foreclosures that have occurred in the state. The senator stated that "foreclosures started by subprime lenders in the Chicagoland area increased from 131 in 1993 to 4,958 in 1999, an increase of more than 3,600 percent."
The senator obtained his foreclosure information from the National Training and Information Center, a non-profit organization in Chicago that does research on housing and other community related issues, including lending and neighborhood safety. It also provides training for those interested in how to do community organizing.

The NTIC currently also works with several affiliate groups, including the Indianapolis-based Organization for a New Eastside which compiles information that it receives from borrowers about their particular lending issues, as well as provides them with education, counseling and advocacy. O.N.E provides no funding to borrowers, though it refers them to local lenders and credit unions after counseling.

O.N.E recently took on the plight of a local family that felt it had been victimized during the purchasing of its home. The organization went to the local branch of the lender for a protest rally, demanding that the loan be looked at again.