Kai Wright's moving Nation cover story from last week's issue of the magazine put a human face on the subprime mortgage foreclosure crisis and illuminated a little remarked upon aspect of the catastrophe -- the way that the mortgage industry has effectively stolen much of black America's hard-won wealth. (The total loss of wealth for people of color due to the subprime crisis could reach $213 billion, including $92 billion for African-Americans and $98 billion for Latinos.)

One of the most useful legislative responses has been proposed by Rep. Stephanie Jones and eighteen other co-sponsors of the Predatory Mortgage Lending Practices Reduction Act, who are calling for lending practices that contribute to the health of the economy rather than to its undermining.

The people drowning in unmanageable debt aren't the only ones affected by this epidemic. Neighborhoods physically decay as houses are abandoned, property values plummet and blight spreads through entire communities.

H.R. 2061 would help stave off this trend by establishing firmer guidelines for determining eligibility of applicants for subprime loans, preventing high-risk candidates from getting locked into loans that they can't realistically expect to pay off.

Moreover, the bill would require agents issuing these loans to obtain credentials holding them to universally recognized standards of accountability.

Finally, the statute would require complete disclosure of charges and fees included in loan packages so that borrowers can make informed decisions about what they're able to afford without being exploited by hidden costs.

Click here to implore your elected reps to support the Predatory Mortgage Lending Practices Reduction Act and make it a legislative priority after they come back from recess.

This post is part of "Housing Crisis Investigation Week," a project of The Media Consortium which will culminate with Live From Main Street Miami- a televised town hall exploring how the city of Miami is facing the economic crisis and working toward a sustainable future. For more information about Live From Main Street and Housing Crisis Investigation week, click here. The Nation is a member of The Media Consortium.

Comments (23)

1. They should also put into this Act some controls on home valuations caused by real estate speculators.

   If either the buyer or the seller doesn't actually live full-time in the house as their primary residence, then this "sale" should be excluded from comparable sales that real estate appraisers use to determine a home's value.

   This will reign in runaway valuations driven by speculators, which is the CHIEF cause of the average American not being able to afford to buy a home in many parts of the country.

   These real estate speculators were also using subprime loans, as this allowed them to flip more properties by providing the lowest monthly payments while they were in the process of these speculative flips.

   Posted by Metteyya at 07/03/2008 @ 2:55pm

2. These real estate speculators were also using subprime loans, as this allowed them to flip more properties by providing the lowest monthly payments while they were in the process of these speculative flips.

   Posted by Metteyya at 07/03/2008 @ 2:55pm | ignore this person | warn this person

   While the speculators contributed to price escalation, the real culprit here is deregulated borrowing standards which allowed home purchasers to qualify for homes they really couldn't afford. Lending standards allowed for qualification based on "teaser" or adjustable rates. This is what drove residential prices. Tighter lending standards will disqualify lots of potential home purchasers, which in turn will decrease demand, and housing prices.

   Posted by OneVote at 07/03/2008 @ 4:09pm

3. I was not familiar with Rep. Jones so I went to opensecrets.org to see who pays her freight. Among the top five industries are real estate and securities&investments. Of course, like most pols, she gets alot of money from lawyers and there is no way to tell who these people represent.

   That doesn't mean the bill is bad. That just means I want to check it out further before I sign on.

   I've been Dodded and Franked enough during this whole mess and am getting pretty cynical.

   Posted by RAGGEDSTEP at 07/03/2008 @ 5:25pm

4. FOR THE LOVE OF GOD, NOBODY PUT A GUN TO THEIR HEAD TO SIGN THE CONTRACT....YOU ARE TELLING ME LIBZ EXPECT THE GOVT TO BAIL OUT DUMB ASSES WHO CANT READ CONTRACTS OR THE PLAIN STUPID????

   GOD HELP US ALL

   Posted by libzRfreaks at 07/03/2008 @ 2:58pm

   Why not? They bail out corporations all the time. How many corporations just got government bail outs because they put their money in the wrong place?

   Posted by Cccomfo1 at 07/03/2008 @ 5:53pm

5. The alleged losses are suspect......just about all subprime loans didn't have equity to begin with! Now, on the flip side, go see how far the financial sector has lost in market value....it's in the TRILLIONS......a nice chunk of it was mine, enough for me to take Frosty w/me to your December cruise!

   Posted by 2HAPPY at 07/03/2008 @ 3:00pm

   So do you support the bail out of corporations Happ kind of like all the ones the government just bailed out because they invested their money into the wrong places?

   Posted by Cccomfo1 at 07/03/2008 @ 5:56pm

6. Mettya has a point. Doesn't one of the small New England States, perhaps Vermont, impose a very high tax on any capital gain made on real estate sales within two or three years after purchase? This seemed to me to be a good idea as it would slow a lot of short-term speculation that seems to have contributed to the subprime mess.

   Posted by jsens at 07/03/2008 @ 6:16pm

7. Posted by libzRfreaks at 07/03/2008 @ 6:06pm

   I swear, you are gonna pop a vein in your head if you don't relax and crack a joke once in awhile. There is alot more to life than politics.

   Posted by Benchrest at 07/03/2008 @ 6:17pm

8. WHY IS IT YOU MARXISTS ALWAYS BITCHING ABOUT WAR COSTS THAT ARE ACTUALLY KILLING THE ENEMY....YET YOU WANT TO OPEN UP THE TREASURY FOR DUMBFUCKS????

   BECAUSE YOU'RE MARXISTS PLAIN AND SIMPLE

   NO THANKS

   Posted by libzRfreaks at 07/03/2008 @ 6:06pm

   You didn't actually answer my question. Let me repaste it for you. I think since it wasn't posted in capitals you might have missed it.

   "They bail out corporations all the time. How many corporations just got government bail outs because they put their money in the wrong place?"

   Posted by Cccomfo1 at 07/03/2008 @ 6:52pm

9. While I am opposed to corporate bailouts, I understand it is part of the culture we have.......politicians see votes in bailing out whoever comes knocking....what do they care? It's not their money to dole out....and if one of my disasters get a bailout, I'll definitely take it!

   Posted by 2HAPPY at 07/03/2008 @ 6:29pm

   So then you were opposed to the bailing out of Goldman Sachs and all those other recent bailouts?

   Posted by Cccomfo1 at 07/03/2008 @ 6:53pm

10. Well Benchcrest....I want to let you know how much I appreciate you worrying about me...thank you

    Posted by libzRfreaks at 07/03/2008 @ 6:53pm

    Can you type like that from now on?

    Posted by Cccomfo1 at 07/03/2008 @ 7:31pm

11. At one time, I was proud of our country's prowess in film making and indignant at piracy........but, not any more. The days of Hunt for Red October, Independence Day, Armagedon, Guns of Navaron, the Rock......aren't coming back until you have your own Awakening!

    Posted by 2HAPPY at 07/03/2008 @ 7:29pm

    Now I understand The guns of Navarone and the hunt for Red October. Hell I will even let Armageddon slide. But you cite the Rock and Independence Day as a movie era we need to return to?

    Posted by Cccomfo1 at 07/03/2008 @ 8:12pm

12. Now, if your industry starts going under cause it makes shitty movies, its celebrities drove off half the audience by being political, and much of the other half rips off what they do see online (which BTW, is how my 23-yrs old see what he sees), will you expect bailouts?

    Posted by 2HAPPY at 07/03/2008 @ 7:29pm

    I actually don't expect bailouts for film and television let em sink if they sink. Major studios have been sunk by bad films in the past ie. Waterworld and no one bailed them out.

    Posted by Cccomfo1 at 07/03/2008 @ 8:14pm

13. I'm just not sure the people pushing these bail out bills are giving us a true picture. The selling of these schemes focus around two points:

    1. People want to stay in their but they are getting kicked out because they can't make a payment that has adjusted higher.

    2. Neighborhoods must be saved from the blight of deserted houses.

    First point-banks will bend over backwards to work with someone who wants to stay in the house. The last thing the lender wants is for that house to go empty.

    The second point goes more to the heart of the problem. We Americans are not just greedy, wer'e mobile. People bought new homes or took out equity thinking there was no way they would lose money.

    Five years later they HAVE TO MOVE because of a change in job, divorce or a whole host of other reasons. The house is now worth thousands less than the mortage amount so they just leave.

    Every day I drive through fairly new subdivisions and see house after empty house. The people who lived are long gone and they ain't coming back.

    Should our tax dollars go to taking those houses off the books of the lenders under the guise of preventing neighborhood blight?

    I don't know if we can do this because this situation is not near the end and far more houses are going to be left empty.

    Posted by RAGGEDSTEP at 07/03/2008 @ 8:22pm

14. Metteyya, how right you are. Many people were & are laughed out of bank & brokerage offices before ever having an opportunity to purchase a home & all because of excessive valuation, as you stated, denying them a chance. So these people go on paying rent to the same speculators responsible for their denial & thus expanding the process across the board! Understand some of the Canadian provinces have laws limiting predatory property speculators. Doesn't an individual have a right to his/her piece of the rock?

    Posted by Sorelish at 07/03/2008 @ 9:04pm

15. this is where the money to invite Zoomer w/me to join Peterfor the December cruise went!

    Posted by 2HAPPY

    well,

    i bet mr. rubin still has the cash......

    Posted by frosty zoom at 07/03/2008 @ 10:50pm

16. 2ha was Baldric in the Black Adder series. He'd make a great sidekick. On the cruise he's the guy wearing a life-preserver in the dining room. Too many left-leaning terrorists on board.

    Posted by Sorelish at 07/04/2008 @ 5:55pm

17. Roots of the Mortgage Crisis By Matthew Bandyk Posted May 1, 2008 US News & World Report

    'The mortgage crisis has stirred up a lot of questions, but perhaps the most important is "Why did this happen?" Atif Mian and Amir Sufi of the University of Chicago think that mortgage originators shoulder much of the blame, and the answer can be found in one five-digit number: the ZIP code.

    In their paper The Consequences of Mortgage Credit Expansion: Evidence From the 2007 Mortgage Default Crisis, they look at ZIP codes where in the mid-1990s a high number of homes had been denied mortgage loans, creating high unfulfilled demand. Mian and Sufi detect a shift of credit toward these ZIP codes after 2001. The problem: These same ZIP codes saw relative declines in income and jobs over the same period, making them breeding grounds for defaults. But the housing prices in these ZIPs kept climbing as mortgages were sold to investors shortly after origination, thus shielding the originators from risk. It was this practice that allowed so many bad loans to proliferate, the authors argue.'

    Deregulation, and lack of regulation and enforecemnt of lending standards and lending institutions, coupled with the ability of lending institutions to dump these highly risky mortgages on secondary markets and clear their books, created an easy money pool which lots of folks were swimming in. Speculators enjoyed the ride of course, but they were parasites that profitted on the larger problem of a corrupted mortgage market that provided outrageous profits to not only mortgage originators, but to realtors, title companies, loan servicing companies, appraisers, title insurance companies, etc.

    Rather than a government bailout, we should be looking at civil and criminal liability at the source of the problem. There is lots of mortgage fraud prosecution going on, i.e., fraud against lending institutions. We need to be pointing the finger at those very same institutions which are the so called victims of fraud. I think they were very willing partners. Many lenders admit that there laws and regulations on the books already that if enforced, would have prevented the mortgage crisis to begin with. Congress, of course, wants to wash its hands of any responsibility and so their official line is that we need more legislation.

    Posted by OneVote at 07/05/2008 @ 10:23am

18. whenever the market attempts to correct itself, Democrats feel a compulsion to "fix" the problem.

    First of all, they should have as little to do with the housing market as possible.

    Secondly, the market is making necessary corrections as it does periodically. The correction is magnified by the market actually making home ownership more accessible to many who had otherwise been shut out.

    This doesn't mean there was not substantial manipulation and even some fraud by both lenders and borrowers. However, expansion of home ownership, contrary to Paul Krugman is a good thing. So if things go south, that is part of the risk in a free market.

    Life contrary to leftist thought is not fair or equal in all things. Nor should it be.

    Real adults understand this and accept both the good and the bad times as part of the cycles a free market produces. The alternative which many on the left prefer would make us mediocre nation and end the wealth accumulation that has made us the most prosperous and giving nation in the history of mankind.

    Posted by lvliberty1 at 07/06/2008 @ 01:19am

19. Real adults understand this... posted by berty

    Wow, that statement is rich, coming from a guy who goes to bed each night sucking his grace infused thumb.

    Posted by Sorelish at 07/06/2008 @ 10:58am

20. Real adults understand this... posted by berty

    Wow, that statement is rich, coming from a guy who goes to bed each night sucking his grace infused thumb.

    Posted by Sorelish at 07/06/2008 @ 10:58am

    And that is supposed to be a leftist intelligent response (not). No wonder that the myth of the intelligent leftist has long ago been exposed as just that, a myth.

    Posted by lvliberty1 at 07/06/2008 @ 11:22am

21. Homes, markets, ok, but there is just one other factor-- OBL already won; we're just catching up to the fact:

    FLASHBACK: Ten Years Ago, Bin Laden Demanded Barrel Of Oil Should Cost $144»

    In a 1998 interview, Osama bin Laden -- the terrorist organizer of 9/11 who still roams free -- listed as one of his many grievances against the U.S. that Americans "have stolen $36 trillion from Muslims" by purchasing oil from Persian Gulf countries at low prices. The real price of a barrel of oil should be $144, bin Laden demanded.

    Ten years ago today, the price of a barrel of oil was just $11. Heading into this holiday weekend, the price of a barrel of oil rested at $144 -- a thirteen-fold increase.

    One month after 9/11, the New York Times wrote of possible "nightmare" scenarios that would deliver bin Laden's goal. Neela Banerjee warned that among the "misguided decisions" that would put oil supplies at risk would be "that the United States attacks Iraq." The Times included this quote in its story:

    ...

    Bin Laden didn't have to become king of Saudi Arabia to achieve his goal; in fact, Bush's policies delivered it for him. The Bush administration's catastrophic decision to invade Iraq, sink the nation into debt to pay for that war, and consequently, weaken the dollar have all caused oil prices to soar astronomically.

    Testifying before the House Foreign Affairs Committee last May, Anne Korin, the co-director of the Institute for the Analysis of Global Security, reminded Congress about bin Laden's goal:

    http://thinkprogress.org/2008/07/05/bin-laden-144-oil/

    OOops, I'm sure the USA is still #1, er, yeah, and well worth the repub new con hsuB/cHeney petty dic'tatorship's total capitulation to OBL...

    Posted by hsuBfools at 07/06/2008 @ 10:06pm

22. WE HAVE TO RETHINK OUR RELATIONSHIP TO OUR HOMES:

    http://pacificgatepost.blogspot.com/2008/06/housing-consumption-not-inve stment.html

    A home is not a piggy bank but an expense.

    Posted by PacificGatePost at 07/08/2008 @ 4:37pm

23. Deferred maintenance is always preferable to eviction from someone's piggy bank in times of crisis.

    Posted by Sorelish at 07/09/2008 @ 2:52pm