“By choosing to misread and misinterpret the existing data on subprime loans, officials at the Center for Responsible Lending have again demonstrated they are more interested in advancing their own legislative agenda than in having an honest debate about the real scope of the problem and how to help those most in need.

According to Moody’s, more than 50 percent of borrowers with subprime ARMs scheduled to reset in the first eight months of 2007 refinanced or otherwise paid off their loans prior to the rate reset.    So more than half of those loans that CRL cites as at-risk will never see their rates reset.  In fact, the bankruptcy changes CRL advocates for would actually make it harder for consumers to refinance out of their subprime loans because it would increase the cost of all new loans.  

And CRL’s stubborn insistence on clinging to ‘loan modification’ as the only means by which a lender can help a borrower in trouble only serves to further mislead policymakers into overreaction.  Repayment plans, forbearance and even short sales are all widely accepted ways of helping a consumer avoid foreclosure.  And yet CRL ignores them, because including them would better demonstrate the vast efforts lenders make.

Policymakers should ignore this report as it is more rhetoric than fact.  Bankruptcy reform is not the answer for consumers having trouble making their mortgage payments.  It will drive up the cost of credit in the form of higher rates, larger down payments and greater closing costs.

Further, bankruptcy is a logistical and financial nightmare for consumers.  Filing for bankruptcy is expensive and approximately two-thirds of all bankruptcy plans fail.  Nobody should be holding it out as a better alternative to working with your lender to try to find a mutually agreeable resolution.”

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The Mortgage Bankers Association (MBA) is the national association representing the real estate finance industry, an industry that employs more than 280,000 people in virtually every community in the country. Headquartered in Washington, D.C., the association works to ensure the continued strength of the nation's residential and commercial real estate markets; to expand homeownership and extend access to affordable housing to all Americans. MBA promotes fair and ethical lending practices and fosters professional excellence among real estate finance employees through a wide range of educational programs and a variety of publications. Its membership of over 2,400 companies includes all elements of real estate finance: mortgage companies, mortgage brokers, commercial banks, thrifts, Wall Street conduits, life insurance companies and others in the mortgage lending field. For additional information, visit MBA's Web site:  www.mortgagebankers.org.