ASSEMBLYMEMBER TED LIEU
53RD ASSEMBLY DISTRICT
For Immediate Release: December 18, 2007
Contact: David Ford
Phone: (916) 319-2053

Statement Of State Assembly Banking And Finance Committee Chair Ted Lieu On Homeowner Protection Regulations Proposed By The Federal Reserve

“The roots of the worst home foreclosure crisis in American history can be traced directly to the Federal Reserve’s lax regulatory regime during the last few years.  Apparently the Federal Reserve still has not learned its lesson when today it promulgated reforms that will do little to stem a crisis of this magnitude from repeating. 

 The Fed Board is uniquely positioned to undo the thicket of kickbacks and deception that drove millions of homebuyers into subprime loans, even though studies have shown that more than 55% of them qualified to prime loans.  Instead, the Board bowed to pressure from the industry and merely required a signed disclosure.  This is a serious crisis, and America’s homeowners deserve better.

The failure of the Federal Reserve to enact meaningful reform means that states must take strong action to ensure this crisis does not repeat.  I am pleased that in California, my colleagues and I have proposed a series of strong reforms that will change business as usual in the mortgage lending industry.  We will ban yield spread premiums, ban negative amortization loans, ban the overwhelming majority of prepayment penalties, and require lenders on each and every basis to ascertain the borrowers ability to repay over the life of the loan.”