Package of legislation will arm homebuyers with knowledge, information to avoid bad loans

WASHINGTON, October 10, 2007 – Standing at the house of a Newark homeowner whose adjustable rate mortgage has skyrocketed recently, U.S. Senator Robert Menendez (D-NJ) today announced that he will introduce an initiative meant to give homebuyers the information and education needed to avoid risky mortgages. The “Know Your Mortgage” package of legislation, which will be introduced after the Senate returns to session, includes bills to disclose upfront more information about loans, enforce truth-in-advertising about mortgages and increase financial education for Americans as young as those in elementary school.

“Homebuyers shouldn’t have to hire a lawyer to decipher the fine print when pursuing the American Dream,” said Sen. Menendez. “The most basic and obvious step we can take to prevent foreclosures is to make sure homeowners and homebuyers are armed with the information and knowledge that helps them make the right decision about a mortgage offer.

“Clearly, this is an important step we can take to solidify the mortgage system. In addition, Congress must pass strong legislation targeting predatory lending, and those responsible for the rise of these ticking-time-bomb mortgages should be held accountable. I continue to explore additional legislative options to stem the mortgage crisis.”

The Census Bureau has reported that almost one in six home-owning households in New Jersey spent at least half of its income on housing last year. In addition median monthly housing costs in New Jersey are the second highest in the nation, and 15,426 New Jerseyans filed first-time foreclosures in the first half of this year, more than half of which were adjustable rate mortgages – that’s well above the national average.

Summary of “Know Your Mortgage” bills:

 Clear Disclosure Form for Adjustable Rate Mortgages

• Create a clear, concise disclosure form for all adjustable rate mortgages that will, among other things, tell borrowers how their loan rates could fluctuate, provide a worst-case payment scenario, and disclose other fees that may apply
• Require accurate disclosure forms to be provided to borrowers well in advance of signing a loan

Accurate Mortgage Advertisements

• Improve accuracy of home loan advertisements by increasing oversight of deceptive claims that mislead borrowers into signing unhealthy loan agreements
• Double funding for enforcement of fraudulent mortgage, consumer loan, debt collection, and other credit advertisements

Increased Financial Literacy

• Invest in financial education programs for young people, from elementary and high school students through college
• Establish a clearinghouse for financial literacy teaching materials and best practices for financial education programs
• Increase access to financial and credit counseling for those in financial turmoil and help educate consumers about navigating the complex mortgage process