California Assembly Banking and Finance Chair Ted Lieu on President Bush’s Proposal to Address the Subprime Mortgage Crisis

SACRAMENTO – Assemblymember Ted Lieu (D-Torrance), chair of the California Assembly Banking and Finance Committee, today issued the following statement after President George Bush unveiled his proposal to address the subprime mortgage crisis:

“The mortgage foreclosure crisis is a rapidly accelerating crisis that threatens to put our economy into a recession. While I welcome President George Bush’s anticipated announcement of a narrow plan to freeze the rates on certain adjustable subprime loans, I believe it falls far short of what is necessary to address the crisis.

“The media has reported that the Bush plan has been whittled down by industry to a select slice of borrowers: those who are current on subprime hybrid mortgages made between Jan. 1, 2005 and July 31, 2007 which are to due to reset between January 2008 and July 2010. Furthermore, eligible borrowers would be further weeded out to those who were not more than 60 days delinquent over the past year, have less than 3% equity in their homes, and are unable to afford an upward adjustment in their interest rate. These borrowers would see their rate frozen at the introductory price for five years. Analysts expect this plan to help 12% or less of borrowers in distress.

“What we need is bold action and we are not getting it from President Bush. The Wall Street Journal has reported that between 55% to 61% of homeowners who received subprime loans could have been put in prime loans. At a minimum, those borrowers should have their adjustable subprime loans restructured into fixed-rate prime loans. The industry should not continue to be unjustly enriched by profits they derived by putting people into higher interest, adjustable subprime loans when the same borrowers had actually qualified for lower interest, fixed rate loans.

“California is ground zero for the mortgage foreclosure crisis. Over 2,000 California homeowners receive a foreclosure notice a week, a number set to double next year. Nationwide, 1.4 million homeowners are expected to face foreclosure next year. Unfortunately, for many of them, the Bush plan will do nothing to help. I call on President Bush to expand his proposal to, at a minimum, include freezing the rates for all homeowners currently in subprime adjustable rate loans who would have qualified for prime, fixed rate loans. It is both necessary to stem the crisis and simply the right thing to do.”

• Assemblymember Ted Lieu, Chair of the Banking and Finance Committee says President's Bush proposal falls far short of what is needed in California.
• Assemblymember Ted Lieu, Chair of the Banking and Finance Committee  says that what we need to do is take all those borrowers who have sub-prime loans that could have qualified initially and convert them to fixed rate loans.  This is about 55% to 61% of all sub-prime loans
• Assemblymember Ted Lieu, Chair of the Banking and Finance Committee says that in California 12,000 homeowners per week receive foreclosure notices.
• Assemblymember Ted Lieu, Chair of the Banking and Finance Committee says that we need to address the mortage crisis right away on a special session of the legislature.