published Tuesday, May 11th, 2010

Corker wants regulators to require down payments for home loans

U.S. Sen. Bob Corker, R-Tenn., said Monday he plans to propose legislation to require that homebuyers make down payments on any home loan to limit chances of another mortgage meltdown like the one that helped trigger a near financial collapse two years ago.

Sen. Corker, a member of the Senate Banking Committee who has helped draft parts of the financial reform package now being debated in the U.S. Senate, said he is concerned that the current financial reform package moving through Congress doesn’t do anything to ensure that regulators require better underwriting of home loans.

“This bill does not deal with the one core issue at this calamity and that is that we had a whole lot of people in this country who borrowed money who shouldn’t have,” Sen. Corker said in Chattanooga during the 50th anniversary luncheon of the Better Business Bureau of Southeast Tennessee and Northwest Georgia. “We had loan underwriting standards that made a lot of homebuyers almost renters because there was no money down.”

  • photo
    Staff Photo by Tim Barber/Chattanooga Times Free Press U.S. Sen. Bob Corker, R-Tenn., speaks at the 50th anniversary luncheon of the Better Business Bureau.

Sen. Corker said he was still talking on Monday with other senators and Federal Reserve Chairman Ben Bernanke about his amendment to address the issue, one of dozens that Republicans and Democrats will debate this week as the Senate continues to consider sweeping regulatory reforms for banks and other lenders.

“If you look at other countries where the default rates are far less than ours, they have a much more robust down payment requirement,” Sen. Corker said.

While urging consumers to put up more money for home loans, Sen. Corker also said he hopes the Senate will take “a more middle-of-the-road” approach to other proposed consumer regulations.

Sen. Corker said the proposed Consumer Financial Protection Bureau included in the U.S. House and Senate Banking Committee versions of the reform plans backed by most Democrats “would be a huge, huge expansion of the federal government” into the financial arena, he said.

“Think about an individual who reports to no one, has no board and has total freedom in rule writing,” he said.

BBB Torch winners

The Better Business Bureau Inc. gave its top awards Monday to:

* AAA Basement Waterproofing Systems for companies with 10 or fewer employees

* Champion Window Co. for companies with 11 to 99 employees

* Ace Hardware for employers with more than 100 employees

* Partnership for Families Children and Adults for non-profit agencies

Source: BBB of Greater Chattanooga

Such authority “needs to be throttled back” to ensure that any new rules don’t unduly compromise the financial health of lenders, Sen. Corker said.

But supporters of the new consumer protection agency within the Federal Reserve argue that new safeguards are needed to protect borrowers and consumers from the type of financial abuses that hurt millions of Americans during the Great Recession.

“It’s about better government, not more government,” said Ed Mierzwinski, project director for the U.S. Public Interest Research Group. “The Consumer Financial Protection Bureau would be the first government agency with only one job: Protecting consumers from unfair and predatory financial practices, no matter where they buy their financial products, at a bank, a car dealer or a payday lender.”

Mr. Mierzwinski said the current system allowed predatory lending “to get out of control and hurt working families.”

Sen. Corker said he expects some type of financial reform plan will pass the Senate this month to reign in such practices.

Despite criticism from many conservatives, Sen. Corker also said congressional approval in late 2008 of the $700 billion Troubled Asset Relief Program “was the right thing to do” to avoid even worse financial problems.

Continue reading by following these links to related stories:

Article: It's tough all over

Times Editorial: GOP thwarts bank reforms

Article: GOP abandons blockade of banking regulation bill

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slr3 said...

I'm glad we have Bob Corker as our Senator. He has a great deal of common & business sense. Think what it would be like if Harold Ford had won the last election. He is an Obama clone.

May 11, 2010 at 7:08 a.m.
OldTimer1933 said...

I agree with Sen. Corker and most reputable business people. 'No down payment' for a home was a political ploy, and like so many other things political, it shifted responsibility from the individual to 'someone else' -- usually the taxpayer -- through various ruses.

I do not think that the taxPAYER should be responsible for paying off a loan which the beneficiary has no substantial stake. That is sort of like being allowed to gamble in Las Vegas and enjoy all the amenities and if you lose, you are free to say, "So what, somebody else will have to pick up the tab?"

May 11, 2010 at 7:58 a.m.
whatsthefuss said...

It wasn't that long ago that 20% was the magic number to home financing. I think it was big banking and the powers to be that ALLOWED us to arrive at where we are today. The new banking products were laughable. No money down, Negative amortization, interest only and adjustable rate mortgages. Certinaly a hayday for the financial sector. Encouraging people to constantly refinance. A very expensive process but they made it look so good. If someone is willing to lend money people will always form a line to accept the offer. This is the reason as a whole we need government reform and common sense from our elected officals to help us from ourselves. I know there are a few out there that want to respond, "I never did that." This isn't a comment about 1 person but rather our soceity as a whole. The fleecing of America's wealth by BIG BANKS and our other friends on WALL STREET must stop. Some may remember having a bankbook that you brought with you when making a transaction and the teller would adjust the rubber bands on the stamp to reflect the date and amount. Those were the days when your money was yours. No realtor, mortgage broker, credit card company. Banks were fair and most people from that time found a path to the AMERICAN DREAM and retirement. There were no DREAM HOMES. People lived within their means with the priority being family. Just nice neighbors and community. Millionaires were like dinosaurs. Middle class was the accepted way of life and it worked! So where did we go wrong??? I'm just sayin!!!

May 11, 2010 at 8:49 a.m.
nucanuck said...

Clearly,a substantial down payment is a sound business practice. The interesting thing is that a Republcan would want a government mandate aimed at private business. Isn't the GOP the party of less regulation?

Would it not make more sense to withdraw government support for lenders that make the bad loans? Then the private sector would quickly set terms that reduced their risk.

Is Corker a Dem in drag?

May 11, 2010 at noon
Sailorman said...

Exactly right NC - look at what's going on with Freddie and Fannie.

May 11, 2010 at 12:07 p.m.
matt_from_chatt said...

Bob Corker..the same one who voted for bailouts? No thanks Mr. Corker, you lost my trust when you were bought, bullied, or fooled by the financial sector with the rest of congress in 2008.

Vote out anyone who supported bailouts. I'm a lifelong republican, but I will not be voting for Corker ever again. And forget Wamp for governor, he's another bailout-lover.

May 11, 2010 at 12:27 p.m.
kdawg said...

Yeah. The failings of the housing market and bank loans were entirely the fault of consumers. The banks had nothing to do with it. We shouldn't ask them to change a thing. Business as usual for the banks. Ma and Pa borrower be damned.

May 11, 2010 at 1:20 p.m.
nucanuck said...

kdawg,

Ma and Pa borrower took the 'too easy' terms because they could. The banks made those 'too easy' loans because they could off-load the risk onto derivatives bond holders. When the music stopped the tax payer ended up paying for the greed based mistakes all the way up the line to avert a systemic collapse.

The end result has been that the average American taxpayer has protected the jobs of the millionaire big banksters,and guess what...people are mad as H.

Ma and Pa should have had to make a bigger down payment so if they defaulted, the losses wouldn't ricochet all they way to the public purse.

May 11, 2010 at 2:43 p.m.
EaTn said...

After the housing market meltdown, I would think that any lending agency not requiring the borrower to have some down payment needs to have their head examined. It was obviously foolish to practice lending 100% of the loan plus points and closing costs, in addition there were some lenders who iced the cake with sub-prime rates.

May 11, 2010 at 3:55 p.m.
Oz said...

At least 10% down plus closing costs. If the seller pays the closing costs, the borrower still has 10% invested.

NO second mortgage for the down payment and no bogus selling price with money back to the buyer.

Buyers with real equity will do everything possible to keep a house.

No money down is renting from the lender and too easy to walk away.

May 11, 2010 at 4:21 p.m.
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