House Financial Services Chairman Barney Frank and Ranking Republican Member Spencer Bachus yesterday sent a letter asking the Government Accountability Office to investigate the high number of foreclosures and to investigate the subprime mortgage market more generally. Because the House Financial Services Committee is planning to pass anti-predatory lending legislation later this year they have asked the GAO to study the current state of the problem, the causes of the problem and to identify potential solutions.
The GAO has a reputation for producing solid nonpartisan research on issues at the request of legislators and is one of the few agencies that so far appears to have escaped most of the relentless politicization of government by Karl Rove and his band of wary wanksters. Hopefully they will prepare an authoritative report that can answer some of the questions that are raised regularly in diaries on this site. Congressman Frank and Bacchus raise many of the questions that need answering, their questions are over the jump.
This diary is also an opportunity for you to add questions you think need answering in order for us to be sure that we don’t repeat these mistakes again.
The letter asks the following questions:
Current State of Problem. What is the scope and magnitude of the current increase in foreclosures, and has the increase been concentrated: geographically; in the subprime or prime market; in refinancing or purchase money transactions; among first-time homebuyers or speculators; in loans made by or through particular classes of lenders (e.g., federally chartered versus other lending institutions)? How does the recent rise in foreclosures compare to the scope of foreclosures in previous housing downturns? Are foreclosure rates higher in regions that are also experiencing higher unemployment levels?
Causes of the Problem. What role has been played by: the rise in subprime lending and risk-based loan pricing; "alternative" or "exotic" mortgages (e.g., interest-only, high loan-to-value, no-documentation and similar loans); predatory practices (e.g., loan flipping and deceptive sales practices, among others); evaluations of borrowers' ability to repay? What effect has the increased involvement of secondary markets (securitization, parceling and packaging of risk, and the like) had on foreclosures? What impact have the 17 consecutive Federal Reserve interest rate increases had on borrowers with adjustable rate mortgages (ARMs)? What role have federal and state regulators played in monitoring and averting foreclosures, and have their actions been adequate and effective? What effect have trends in employment both nationally and regionally had on delinquency rates? What impact has the slow down or absence of home price appreciation had on foreclosure rates, particularly in high unemployment regions? Have life events, such as job loss, major sickness or death had an impact on current foreclosure rates?
Potential Solutions. What constructive role in resolving the problem and averting future foreclosures can be played by: mortgage counseling, financial education, lender forbearance and loan "work-outs," among other tools? What role can the Federal Housing Administration (FHA) and the housing Government Sponsored Enterprises (GSEs) play in refinancing failing loans and offering new mortgage products? What impact, if any, will use of these tools have on the number of borrowers who will have access to mortgage credit?
Add your questions in the comments.