A handful of protestors demonstrated in downtown Oklahoma City on Wednesday as part of a national effort by an advocacy group for low-income families to pressure the Federal Reserve to crack down on predatory practices among subprime mortgage lenders.
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"We're asking the Federal Reserve to use the power that it has to regulate the industry more strictly so that brokers and lenders take some responsibility for their actions,” said Erica Krause, director of the Oklahoma City chapter of the Association of Community Organizations for Reform Now (ACORN).
ACORN also advocates new rules to rein in unscrupulous behavior by individuals who broker subprime loans, which are high-interest loans for people with credit problems who are unable to obtain standard mortgage loans, Krause said.
"As it stands right now, there are almost no repercussions for a mortgage broker or a loan officer who defrauds someone into taking a bad loan,” Krause said.
ACORN staged demonstrations on Tuesday in every U.S. city that houses a Federal Reserve office, Krause said. Oklahoma City is home to a branch of the Federal Reserve Bank of Kansas City. Local officials there had no comment on the demonstration.
The group also wants the Federal Reserve to prohibit penalties for prepayment of loans and to ban loans that "become unaffordable” after the interest rate increases.
The Federal Reserve has scheduled a hearing next week on subprime lending.
ACORN, a nonprofit group founded in Arkansas in 1970, says it is the nation's largest community organization of low-income and moderate-income families. The Oklahoma City chapter launched its operation in February, Krause said.
Federal Reserve Chairman Ben Bernanke this week discussed the current problems with high numbers of defaults on subprime loans, which tripled during the housing boom of 2004 and 2005. Slowing growth in home values and higher interest rates have prompted a surge in loan defaults, nearly all of it among homeowners with adjustable-rate mortgages.
In the Oklahoma City metropolitan area, 8,104 homeowners were in some state of foreclosure in 2006, ranking it 29th for cities with the highest foreclosure rates in the country, ACORN said.
Bernanke said the industry has tightened lending standards and consumers are examining subprime loans more carefully. But, Bernanke warned, things likely will get worse before they get better.
"We are also likely to see further increases in delinquencies and foreclosures this year and next as many subprime adjustable-rate loans face interest-rate resets,” he said. "We will follow developments in the subprime market closely.”
Bernanke said regulators are considering what, if any, action is needed to prevent the recurrence of such crisis.
"In deciding, we must walk a fine line: We have an obligation to prevent fraud and abusive lending; at the same time, we must tread carefully so as not to suppress responsible lending or eliminate refinancing opportunities for subprime borrowers.
Krause said ACORN is asking Oklahomans who are in any stage of foreclosure due to a subprime loan to contact her office at (405) 286-1982. ACORN can provide a certified loan counselor to help try to work out a payment plan between a homeowner in financial straits and a lender, Krause said.
The group also hopes to persuade some recipients of subprime mortgages to tell their stories to spread ACORN's message of "fighting back,” Krause said.
Italian lawmakers on Wednesday criticized major U.S. credit rating agencies, saying they ill-served international financiers by failing to properly evaluate the risks of investments tied to residential mortgages.
Mortgage loans are commonly packaged into securities and sold to investors around the world, but a rise in defaults among U.S borrowers with weak, or subprime, credit has made those investments seem much riskier in recent months.
In a letter to German Chancellor Angela Merkel at the start of the Group of Eight summit, four Italian lawmakers and two Italian members of the European parliament said European officials should push the U.S. to open up competition among credit rating agencies.
The U.S. ratings market is dominated by three companies: Moody's Corp., Fitch Ratings and Standard & Poor's, a division of McGraw-Hill Cos.
The letter said those agencies failed to accurately assess the risks of bonds backed by subprime mortgage loans. About 13.3 percent of subprime loans were delinquent in the fourth quarter of 2006, according to S&P.
The Associated Press
