Governor orders proposals for subprime lender relief


Gov. Ted Kulongoski has ordered state regulators to prepare new regulations and legislative proposals to homeowners affected by subprime lending woes.

"We must make sure that no one loses their home because of an unfair loan product or lack of information," Kulongoski said in a news release.

Steps Kulongoski ordered the Department of Consumer and Business Services, which regulates mortgage lenders, to take include:

"" Forming a work group of legislators, consumer advocates and lending industry representatives to prepare legislation for the February 2008 special session and the 2009 regular session.

"" Increasing enforcement against misleading advertising aimed at vulnerable homeowners.

"" Connecting Oregonians with counseling to avert home foreclosures.

Subprime loans typically are offered to people with weak credit. The loans often come with higher fees and low introductory interest rates that jump after the first two or three years.

So far Oregon has had a relatively low rate of foreclosures from subprime loans. But regulators worry that many of the loans will sprout unaffordable interest rates within the next two years.

The new work group will look at new "mortgage rescue" schemes that seem to be preying on people with subprime loans.

"We are just starting to see it here, and we are obviously concerned about it," said Cory Streisinger, director of the Department of Consumer and Business Services.

"It's victimization of people who are already at risk."

The work group also will examine prepayment penalties, which can make it prohibitive for borrowers to get out of bad loans and underwriting standards for subprime loans, which sometimes failed to consider borrowers' ability to pay.

The state also plans to link homeowners with national foreclosure counseling groups, and to encourage formation of Oregon-based efforts, Streisinger said.

The state also plans stepped-up consumer awareness, using funds available from lawsuit settlements with mortgage lenders.

Streisinger hopes the new work group can build consensus for change among industry leaders.

Complaints about mortgage lending practices have multiplied in Oregon in recent years and examiners have been added to monitor lenders.

For the first time, regulators are examining the records of out-of-state lenders that have no offices here but offer loans in Oregon.

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