2009-02

Address Foreclosures Comprehensively

Marin (GA) Introduced April 09 Executive Meeting; Ratified

Requesting that the United States Congress pass legislation that comprehensively addresses
the needs of subprime consumers and eliminates unnecessary home mortgage foreclosures;
and for other purposes.

WHEREAS, over 7.2 million families in the United States hold subprime home mortgage loans
that total over $1.3 trillion; and

WHEREAS, in 2008, more than 2.3 million American homeowners faced foreclosure
proceedings, which is an 81 percent increase from 2007, with homeowners with subprime
mortgages most at risk; and

WHEREAS, 45 million homes, are projected to lose collectively $223 billion, in 2008 and 2009
solely due to declining home values caused by foreclosures on subprime loans of nearby
homes; and

WHEREAS, foreclosure prevention programs created to provide immediate relief to at-risk
homeowners have had limited participation by homeowners and significant "redefault" rates,
and a substantial number of these subprime mortgage loans will not qualify for loan modification
programs currently proposed by federal agencies and mortgage loan servicers; and

WHEREAS, modified mortgages remain at risk if homeowners do not have access to
supplementary sources of traditional credit that provide flexibility in meeting their financial
obligations and build or rebuild their credit scores in order to be a part of the financial
mainstream and positively contribute to the economy; and

WHEREAS, over 40 perecent of Americans are estimated to have FICO credit scores below
660 and are thereby considered "subprime" borrowers, and a lender's reporting of a mortgage
loan as delinquent by 90 days or more to credit reporting agencies will significantly lower the
homeowner's credit score; and

WHEREAS, credit scores are used in a growing number of transactions and situations, such as
opening and maintaining a checking account, determining eligibility for employment, auto
insurance, apartment rentals, connection to utilities, as well as traditional consumer credit; and

WHEREAS, underwriting for the subprime consumer requires customized analytics based on
significant historical and individualized consumer data which is not part of traditional prime
lending underwriting, which relies heavily on credit scores designed to be broad based and not
reflective of subprime consumers' unique characteristics; and

WHEREAS, traditional lenders, because of their focus on prime consumers, lack the resource
commitment and data availability to prudently service and effectively lend to subprime
consumers; and

WHEREAS, nontraditional lenders have also not been able to adequately meet all of the needs
of subprime consumers due to their focus on certain limited products, higher funding costs, and
limited regulatory transparency; and

WHEREAS, all forms of consumer lending are being reduced dramatically, including a lenderforced
reduction in credit card lending that is estimated to reduce available consumer credit by
$2 trillion over the next 18 months, creating the unintended consequence of further
disenfranchising subprime consumers from financial services; and

WHEREAS, without a comprehensive solution, millions of American families will be tragically
consigned to permanent subprime status, without any clear path to rejoin the financial
mainstream, further retarding the growth of our national and state economies during this
recessionary period; and

WHEREAS, since traditional methods used to service prime consumers do not sufficiently meet
the needs of subprime consumers, a separate financial institution is needed to meet the needs
of subprime consumers while encouraging, educating, and supporting the success of
consumers as they seek to graduate into the financial mainstream; and

WHEREAS, in order to create fair and equal access for essential services for many hardworking
consumers, Congress should enact legislation that will establish a new type of federal
financial institution designed expressly to meet the ongoing financial needs of the subprime
consumer, including restructuring subprime home mortgage loans; and

WHEREAS, such a financial institution should create and adopt specialized procedures,
policies, and programs to support its mission to help bridge subprime consumers back to the
financial mainstream.

THEREFORE, BE IT RESOLVED, that the members of this body request that the United States
Congress make efforts to enact legislation establishing a new type of federal financial institution
designed expressly to meet the ongoing financial needs of the subprime consumer;

BE IT FURTHER RESOLVED that such a financial institution should create and adopt
specialized procedures, policies, and programs to support its mission to help bridge subprime
consumers back to the financial mainstream;

BE IT FURTHER RESOLVED that NHCSL will recognize, support and promote the efforts of
the new federal financial institution and that will incorporate and implement the objectives
detailed in this Resolution to equitably provide mainstream financial services and credit products
to the financially underserved consumer.

This resolution was adopted on April 25, 2009, at the National Hispanic Caucus of State Legislators Executive Committee Spring Meeting held in Washington, DC and ratified at the NHCSL 2009 Annual Meeting held in Santa Monica, California
on November 21st, 2009.