A broad effort to curb abuses in Oregon's mortgage lending industry may land on the 2008 ballot, with consumer advocates and industry representatives seemingly deadlocked on a proposed legislative package.
Progressives see the issue as a potent one that could help rally their core voters in a presidential year.
A workgroup convened by Oregon Gov. Ted Kulongoski has been meeting regularly this fall, hoping to come up with a package of "consensus" legislation that would win approval during February's legislative session.
But consumer advocates boycotted a meeting of the workgroup this week, charging that industry groups were haggling over relatively minor points in hopes of running out the clock on reform efforts. An eleventh-hour burst of industry opposition torpedoed more widespread reforms proposed during the 2007 legislative session.
At issue are subprime loans, mortgages with high interest rates and fees that are generally offered to high risk borrowers. In the past year, thousands of homeowners nationwide have defaulted on such loans, many issued during the peak years of the real estate bubble.
Oregon has escaped the brunt of the foreclosures, but statistics released early this month suggest the state's turn could be coming. According to RealtyTrac, Inc., an online site for the buyers and sellers of foreclosed property, foreclosure filings in Oregon were up 53 percent in July, August and September compared with the same time period last year.
Members of the workgroup have found common ground on several points:
162; Regulating so-called "mortgage rescue scams," where fly-by-night lenders dangle sketchy offers of refinancing or buyouts for owners in danger of losing their houses.
162; Creating a registry that would allow consumers to check the history and background of their lender.
162; Better language around foreclosure notices, so homeowners in that situation will clearly understand their options.
But consumer advocates, and some Democrats involved in the negotiations, had been hoping for broader reforms, including new regulations on the big penalties that are charged if subprime homeowners try to refinance their mortgage. They are also pushing to require lenders to make sure homeowners can afford the loans they are being offered.
Cory Streisinger, director of the state Department of Consumer and Business Services, said she expected that the more limited package of bills would still find favor with legislators in February, and that a broader package could be crafted for the six-month legislative session that begins in January 2009.
"We certainly know that the consumer groups wanted to go further in 2008," Streisinger said. "It doesn't look like the workgroup as a whole will come forward on the broader issues. But the work isn't done"
In a letter sent to the governor Thursday, consumer advocates charged that the smaller package of legislation is "too narrowly focused on the foreclosure process, and wholly inadequate for protecting borrowers on the most important day &
the day they sign the papers to become homeowners.
"Therefore, we cannot in good conscience grant the appearance of consensus for these recommendations alone," wrote the groups, which include AARP, the Oregon State Public Research Interest Group and Our Oregon.
Mortgage industry representatives say they stand ready to forge ahead with a deal on the smaller package of reforms, but are balking at demands for bigger change, cautioning about the potential for reduced home ownership and affordable housing. Instead, the industry would prefer to see how national reforms play out in the state, said Chris Ambrose, president of the Oregon Mortgage Lenders Association.
"We wouldn't have been on the task force if we had an interest in running out the clock &
that's not in the best interest of the state of Oregon," Ambrose said. "It's also not in the best interest to put into place bad law, just because certain groups feel that something needed to be done."
If consumer advocates turn to the ballot, they could have an issue that resonates with working and middle-class voters.
"Eighty-seven percent of registered Democrats and 82 percent of registered Republicans support cracking down on abusive lending practices," said Angela Martin, a spokeswoman for Our Oregon. "If you take this out to the people, they support it."
Mortgage reform may be on 2008 ballot