Despite years of predatory lending that’s now led to 10,477 homes in California’s 24th Congressional District expected to be in foreclosure during 2009, today Representative Elton Gallegly voted to help mortgage companies continue their irresponsible loan practices rather than helping middle class families keep their homes.

“Leave it to Representative Elton Gallegly to side with predatory lenders instead of the responsible families who play by the rules but are still losing their homes in this recession,” said Andy Stone, Western Regional Press Secretary for the Democratic Congressional Campaign Committee. “The last thing Representative Gallegly should be just saying no to in the middle of a foreclosure crisis is cracking down on the abusive lending practices that got us into this mess to begin with.”

Background

· The Mortgage Reform and Anti-Predatory Lending Act (H.R. 1728) puts an end to the kind of predatory lending practices that helped lead to the current financial crisis and also prevents borrowers from misstating their income to qualify for a mortgage. [H.R. 1728, # 242, 5/7/09].

· The measure establishes statutory standards for all lenders and places limits on high-cost mortgages.

· It bars lenders from steering consumers to loans that they cannot reasonably be expected to repay. It also prohibits lenders from paying mortgage brokers for getting consumers into loans with above-market interest rates.

· The bill directs banking regulators to establish rules to require lenders to retain at least 5% of the credit risk of loans that are sold to third parties in the secondary market so that lenders would bear some of the risk in mortgage foreclosures.

o However, prime, 30-year fixed-rate mortgages, fixed-rate mortgages issued by the FHA and the VA, and those conforming to Fannie Mae and Freddie Mac standards would be exempt from this 5% risk-retention requirement.

· The measure also requires that tenants in foreclosed properties be given at least 90 days notice before having to leave.

· According to the Center for Responsible Lending (CRL), 10,477 homes in California’s 24th Congressional District are projected to be in foreclosure in 2009 [http://www.scribd.com/doc/12952986/CRL-Congressional-District-Foreclosure-Projections-21709].