Schumer proposes $300 mln in subprime aid
WASHINGTON (Reuters) - Community groups that help subprime borrowers try to save their homes from foreclosure would receive $300 million in aid under legislation introduced on Thursday.
The infusion of federal money would help consumer groups reach out to troubled borrowers and, in some cases, provide new financing directly.
The groups that would benefit from the money are in direct contact with delinquent homeowners and guide them through the complicated steps they can take to save their homes, said Sen. Charles Schumer, chairman of a Senate subcommittee on housing and sponsor of the legislation.
"They know how to do it. Their role is critical," he said of the consumer groups that aim to help troubled borrowers.
"We've learned that borrowers who are delinquent on their loans are at a distinct disadvantage," when trying to change the terms of a bad loan, the New York Democrat said.
Schumer's legislation is the first proposal from federal lawmakers aimed at alleviating the crisis in the subprime mortgage market that serves borrowers with damaged credit.
Schumer's legislation also would give mortgage brokers, lenders and investors greater responsibility for loans that go bad.
Lenders would be accountable for their brokers who use fraudulent means to sell loans, and investors might have to pay if the mortgages they own were offered to borrowers who were not fit to make the payments.
Chris Dodd, chairman of the Senate banking committee, has said he would prefer not to use legislation to help subprime mortgage woes. On Thursday, Schumer and a leading community group said Dodd's approach was too timid.
"I think what Senator Dodd is doing is terrific but I think there is a whole area of people who moral persuasion won't work and that is who you always aim legislation at," Schumer said.
John Taylor, president of the National Community Reinvestment Coalition that promotes equal access to credit, said he was "disappointed" Dodd has not proposed legislation to help regulate the mortgage market and help subprime borrowers.
"We would like to see Dodd be more aggressive," Taylor said.
Dodd's office had no immediate comment.
