Consumer Advocates Call for Subprime Foreclosure Moratorium
National civil rights groups, including the Leadership Conference on Civil Rights, the NAACP, the National Fair Housing Alliance and the Center for Responsible Lending called today for mortgage lenders, loan servicers and loan investors to institute an immediate six month moratorium on subprime home foreclosures. The groups said they want to stop home losses for families that received unaffordable subprime mortgages. Consumer advocate organizations assert that so-called â€œexplodingâ€? ARMs, as well as other types of non-traditional mortgages, have been a driving force in massive foreclosures occurring today. Industry sources say the move by consumer groups was expected, but represents an overreaction to the current problems in the market. "A large part of the problem here is the lack of available credit to subprime borrowers who most need it," said one industry source, on the condition of anonymity. "Holding properties for six months won't solve the credit problem." "I'd be really surprised if anyone at the CRL has a solution for how to best stick their necks out and provide credit to these troubled borrowers they care so much about. Our industry did it for them these past few years -- and we're now paying the price for it." In a statement to the press released Wednesday, the groups characterized the need for a moratorium on foreclosures as "urgent," and said that six months will create enough time for the industry to work to establish benchmarks and set long-term goals for easing the foreclosure crisis and to assist borrowers. â€œIf lenders, servicers, Wall Street and policymakers allow the flood of subprime foreclosures to continue rising unchecked, years of economic progress in communities of color will be wiped out, and the racial wealth and equity gap will widen even further,â€? said Hilary O. Shelton, director of the NAACP Washington Bureau. â€œWithout intervention, subprime foreclosures will impose the greatest drain on African-American and Latino wealth ever experienced in this country.â€? â€œHomeowners saddled with defective loans need relief,â€? said Mike Calhoun, president of the Center for Responsible Lending. â€œThose responsible for these mortgages have a duty to fix the broken product they sold just like anyone else. The industry must work quickly.â€? The groups also called on Congress to pass anti-predatory legislation, including a private right of action, to assure protection for minority and other communities and to see that the current troubles affecting the subprime credit market do not arise in the future.