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Sen. Klobuchar Meets with Local Groups That Help Homeowners Struggling with Subprime Foreclosures

Klobuchar Says Federal Action Is Needed to Protect Homeowners & Communities

November 4, 2007

Minneapolis, MN – U.S. Senator Amy Klobuchar joined U.S. Representative Keith Ellison for a meeting today with several local organizations, including Twin Cities Habitat for Humanity, that are helping homeowners who are struggling with foreclosure threats due to subprime mortgage problems.

Klobuchar and Ellison also heard from a family that is dealing with a foreclosure threat after their adjustable rate mortgage suddenly “exploded” with a much higher interest rate that increased their monthly mortgage payment by hundreds of dollars.

“America is in the midst of a subprime mortgage crisis,” said Klobuchar.  “If the problem is not addressed, Minnesota alone stands to lose $1.6 billion in property value over the next two years.”

According to a report issued Thursday, home foreclosure filings in the nation doubled in the third quarter of 2007 compared to the same period last year. 

“We need to make sure that abusive and exploitative practices in subprime lending come to an end,” said Klobuchar.  “We also need to help the millions of families who either are already in foreclosure or face the threat of it.  This is not about just about individual homeowners, because this problem harms entire neighborhoods and communities by dragging down property values.”

In recent years, the subprime lending market expanded rapidly with the use and abuse of adjustable rate loans issued to financially-vulnerable borrowers.  As interest rates on these mortgages jumped sharply, many homeowners have had to struggle to make the higher payments.  At the same time, refinancing is difficult because property values have stagnated or declined.  As a result, delinquency and foreclosure rates are rising dramatically.  The subprime mortgage crisis has also created broader problems in the economy, threatening the solvency of lenders and other financial institutions.

Klobuchar said that strong national legislation is needed to stop predatory lending practices and to provide financial counseling and other assistance to help protect homeowners and neighborhoods from foreclosures. 

Sen. Klobuchar serves on the Congressional Joint Economic Committee and is a cosponsor of the Borrower’s Protection Act (S. 1299), which would provide protection to homeowners from predatory lending practices.

Rep. Ellison serves on the House Financial Services Committee.  This summer he introduced the Fairness for Homeowners Act of 2007 (H.R. 3081), which is modeled after landmark state legislation enacted this year in Minnesota.  Much of Ellison’s bill was incorporated into the Mortgage Reform and Anti-Predatory Lending Act of 2007 (H.R. 3915) recently introduced by U.S. Rep. Barney Frank.

In addition to Twin Cities Habitat for Humanity, organizations that participated in the roundtable included:  ACORN, Community Action Partnership of Suburban Hennepin, Minnesota Home Ownership Center and Minnesota Housing Partnership.

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