Clinton Seeks Aid for At-Risk Homeowners

The AP reports:

Democratic presidential front-runner Hillary Rodham Clinton on Tuesday called for penalties against mortgage brokers who engage in predatory lending and a $1 billion federal fund to help homeowners avoid foreclosure.

The New York senator has been critical of subprime mortgages, loans given to people with blemished credit histories or low incomes. Weak home prices and rising interest rates have made it increasingly difficult for borrowers to keep up with their payments; delinquencies and foreclosures are rising sharply.

``Today we have a clear choice: We can look at the statistics, wring our hands and continue to do nothing, or we can do what America has done in times of difficulty, acknowledge we have a real challenge and confront it head-on with real solutions,'' Clinton said. ``I think we need to act now with smart, practical solutions to strengthen our housing and mortgage markets.''

The New York senator's proposal includes a $1 billion federal fund to help homeowners avoid foreclosure, an end to prepayment penalties and more affordable housing options.

The nation's 10th largest mortgage lender, American Home Mortgage Investment Corp., filed for bankruptcy protection a day earlier. Two other mortgage lenders said they are not accepting new applications. Falling home prices and a spike in payment defaults have scared investors away from investments backed by home loans.

``It's a combination now, of economic conditions that are not working for the majority of Americans, and unsavory practices that are undermining the dream of home ownership,'' Clinton said.

When Congress returns from its summer recess, Clinton said she will introduce legislation targeting ``fly-by-night mortgage lenders'' who make ``really seductive offers.''

No word yet from Fannie Mae.