Schumer Releases New County-by-County Report on how many New Yorkers May Have Been Hoodwinked into Subprime Mortgages Laden with Spiraling Interest Rates
WASHINGTON, DC – November 15, 2007 – Today, U.S. Senator Charles E. Schumer released a new report revealing how 50,000 Upstate New Yorkers may have been duped into taking on costly subprime loans even though they could have qualified for more affordable, prime mortgages. Schumer placed the blame on the shoulders of brokers and lenders who received financial perks for steering thousands of Upstate New Yorkers into taking on expensive subprime mortgages instead of safer prime mortgages.
To crack down on disingenuous mortgage brokers and deceptive subprime loans, Schumer announced a bill to ensure that mortgage brokers give consumers simple and straight forward information on loan terms.
“In every county and in every corner of New York State we’ve seen residents swindled into taking on inflated and grossly expensive mortgages, burying families in debt for years. Meanwhile, disingenuous brokers have made off like highway bandits,” said Senator Schumer. “This bill will peel back the shroud of deception on thousands of subprime loans, making sure New York residents can easily get the best deal possible when taking out a loan.”
Today, Schumer revealed that an estimated 50,000 Upstate New Yorkers currently locked into a subprime loan could have been eligible for prime mortgages (based on national averages), meaning that they may have been duped by brokers and lenders into taking out less affordable loans. Schumer said that increased transparency and simpler disclosure on the now-incredibly complicated subprime mortgage documentation could have helped thousands of families avoid forecloses.
Schumer today issued a report detailing the latest, startling statistics regarding the subprime mortgage crisis in upstate New York. Over 160,000 upstate New Yorkers are locked into unaffordable subprime loans. Subprime borrowers in upstate New York took out an average loan of nearly $120,000. This has resulted in a total outstanding subprime debt of over $26 billion in upstate New York alone.
Furthermore, recent estimates by industry experts have revealed that approximately one-third of all subprime borrowers may have been eligible for traditional mortgage options, thereby avoiding the excessively high subprime interest rates, as well as the hassles of refinancing when the loan becomes unaffordable.
Below are county-by-county statistics regarding outstanding subprime mortgages in upstate New York.
- The Capital Region has an estimated 28,878 borrowers with subprime loans. The total outstanding subprime debt for the region is over $3.7 billion.
- Central New York has an estimated 17,462 borrowers with subprime loans. The total outstanding subprime debt for the region is nearly $1.6 billion.
- The Rochester-Finger Lakes Region has an estimated 21,018 borrowers with subprime loans. The total outstanding subprime debt for the region is nearly $2 billion.
- The Hudson Valley has an estimated 50,175 borrowers with subprime loans. The total outstanding subprime debt for the region is over $14.8 billion.
- The North Country has an estimated 9,457 borrowers with subprime loans. The total outstanding subprime debt for the region is over $996 million.
- The Southern Tier has an estimated 12,312 borrowers with subprime loans. The total outstanding subprime debt for the region is over $1 billion.
- Western New York has an estimated 24,390 borrowers with subprime loans. The total outstanding subprime debt for the region is over $2.1 billion.
To ensure Upstate New Yorkers are protected against deceptive mortgage loans, Schumer today announced a bill that will bring accountability to the industry and empower consumers.
Schumer’s bill will create a “Schumer Box” to help borrowers better protect themselves from unscrupulous and predatory lending practices by mandating that the lender disclose the following key details in one, easy-to-read page that must be signed by both the borrower and the lender:
- The initial interest rate and monthly payment on the mortgage (including taxes and insurance)
- The date(s) that the interest rate resets
- The estimated fully indexed interest rate and monthly payment after reset (including taxes and insurance)
- The fees that the borrower pays to the lender at closing
- Any prepayment penalties
- Disclosure of any balloon payments, negative amortization, or subordinate or “piggyback” loans that are features of the loan
Schumer’s bill will amend the Truth In Lending Act (15 U.S.C. 1601) to include the provision requiring a one page disclosure form at least seven days before closing, and contains specific language regarding the format that would be required by all lenders for proper mortgage disclosure. The seven day window will give homebuyers sufficient time to assess whether they want to accept the terms of the mortgage being offered to them, as well as to find another mortgage if necessary. The Schumer bill would also require that lenders provide this information to borrowers at the time the loan is approved.
The idea of a disclosure document originated as a provision of the Fair Credit and Credit Card Disclosure Act of 1988, which Senator Schumer authored while a member of the House of Representatives. It was the first law to mandate that credit card agreements include a simple table or box that clearly displays important information such as APRs, transaction fees, annual fees and grace periods. The disclosure form has come to be known within the credit card industry as a “Schumer box.”
Schumer is also the author of the Borrower’s Protection Act, which would, for the first time, bring independent mortgage brokers under federal regulation. The bill would impose a fiduciary responsibility on the broker, require originators to underwrite loans at the fully indexed rate, prohibit steering of borrowers into unsuitable loans, and hold lenders responsible for policing their associated appraisers and brokers.
