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.”
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.
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.