US lawmaker says no return to mortgage red-lining
By John Poirier and Patrick Rucker
WASHINGTON, March 29 (Reuters) - A U.S. lawmaker on vowed on Thursday to stop discrimination in mortgage lending as he crafts legislation to curb predatory practices against minorities obtaining home financing.
"We cannot return to red-lining," Barney Frank, chairman of the House Financial Services Committee, said in a letter to members of the panel seeking input on ways to address subprime lending. Subprime loans are given to people with poor credit histories or no credit history.
Red-lining is a discriminatory practice through which banks and other financial institutions refuse or limit loans, mortgages, insurance and other services, often to minorities in inner-cities.
In the letter to committee members, which was obtained by Reuters, the Massachusetts Democrat said there was evidence that some borrowers, such as African-Americans and Hispanics, were shifted into subprime categories because of their race.
"Real damage has been done to families and communities as many adjustable-rate mortgage loans 'reset' to higher interest rates and monthly payments," Frank said in the letter. He said the committee was working toward "a balanced solution that stops abuses, preserves access to credit, and aids stable homeownership."
Lenders lowered their underwriting standards to attract a greater number of marginal borrowers as the U.S. housing market caught fire earlier in this decade.
But the same new-style loans and adjustable-rate mortgages that allowed people to buy homes they really couldn't afford have contributed to the recent surge of delinquencies and defaults.
Frank said earlier this month that he was working on a bill that would restrict risky mortgages. Earlier this week, a congressional subcommittee held the second of two hearings this month on the matter.
He told members the bill should focus on providing credit to troubled markets while taking a "measured approach" to cracking down on abusive lending.
Legislation will seek to align the interests of lenders and consumers, provide simple and clear disclosures to all borrowers, and wipe out incentives for mortgage originators to steer consumers into bad loans, Frank said.
((Editing by Toni Reinhold; Reuters Messaging: john.poirier.reuters.com@reuters.net; E-mail:john.poirier@reuters.com +1 202 898 8399)) Keywords: USA SUBPRIME/LAWMAKER
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