Yesterday, the Senate Banking Committee continued its examination of housing finance reform with a hearing entitled “Essentials of a Functioning Housing Finance System for Consumers.” The witnesses were: Mr. Eric Stein, Senior Vice President, Center for Responsible Lending;; Mr. Rohit Gupta, President, Genworth Financial, Inc.;; Mr. Gary Thomas, President, National Association of Realtors (NAR);; Mr. Laurence E. Platt, Partner, K&L Gates;; Ms. Alys Cohen, Staff Attorney, National Consumer Law Center;; Mr. Lautaro Diaz, Vice President, Housing and Community Development, National Council of La Raza.
Chairman Tim Johnson’s (D-SD) opening statement expressed his concerns about the impact of stricter underwriting standards on the ability of creditworthy borrowers to obtain mortgages (especially in rural and underserved markets). He emphasized the need to ensure that the mortgage market is accessible to all responsible borrowers. In contrast, Ranking Member Mike Crapo (R-ID) pointed out that one of the major causes of the financial crisis was a significant deterioration in underwriting standards. Based on this experience, he argued that if the federal government provides a guarantee for mortgages, it should be conditioned on strong underwriting standards to protect taxpayers. He also stressed that if Congress takes actions that call into question the validity of mortgage contracts, future homeowners could end up paying significantly higher rates.
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