During recent Congressional hearings on the collapse of the subprime mortgage market, Mike Calhoun, from the Center for Responsible Lending, testified about the effect of subprime lending on home ownership during the past nine years. According the Center for Responsible Lending, subprime loans made during the past nine years have led or will lead to a net loss of homeownership. The issue is not access to home loans, according to Calhoun; it is expanding home ownership.
There is or will be a net loss in home ownership due to the high number of refinances and mortgage losses to foreclosures. Since 1998, only 9% of subprime loans have gone to first-time home buyers. During this same time, the Center for Responsible Lending estimates that 15.6% of all subprime loans have ended or will end in foreclosure. Calhoun calls for greater regulatory guidance to require depository institutions to consider a borrowers' ability to repay loans when lending money and for strengthening of bankruptcy laws to help homeowners already harmed by subprime loans, among other remedies.
The Federal Reserve's director of consumer and community affairs, Sandra Braunstein, believes the existing regulations in the subprime market are sufficient to combat any problems there. Some in Congress fear that increased regulation will reduce access to credit. It is difficult to understand however, why Congress would not want to provide greater protections to individuals who are encouraged to take our loans which they are not able to repay. Consumers preyed upon by mortgage brokers for ever more risky loans and end up losing their homes require remedies to hold the lenders and brokers accountable for their actions.