Now, as banking regulators are rewriting the rules for the mortgage market, unusual alliances have sprung up in opposition to tighter lending standards. Advocacy groups like the N.A.A.C.P. and the National Council of La Raza, a Latino civil rights organization, on the hand, and the American Bankers Association on the other, are joining together to fight rules they say could make home loans less affordable for minority and working-class Americans.
WASHINGTON � The weight of the mortgage crisis fell heavily on lower-income and minority communities, where first-time home buyers often fell victim to the predatory lending practices that resulted in an explosion of defaults and foreclosures.
That left consumer advocates and civil rights groups often at odds with bankers, mortgage lenders and their lobbyists in the work of the debate over the financial regulation act last year, which aims to rein in the subprime mortgage excesses that inflated the housing bubble.
�I think everybody agrees that the enthusiasm for promoting home possession went way far,� said David Stevens, chief executive of the Mortgage Bankers Association. �But now the risk is that they go far the other way. They still need to be able to make affordable mortgages that don�t go to the rich, who can afford the largest down payments and who have the most positive credit ratings.�
The growing alliance between civil-rights organizations and banking lobbyists could extend beyond the current round of financial rulemaking. If Congress turns its focus to restructuring Fannie Mae and Freddie Mac, for example, the same groups could voice similar concerns over anything that restricts the availability of credit for first-time home buyers.
�Most people don�t have twenty percent to put down,� said Janis Bowdler, a project director in La Raza�s office of research, advocacy and legislation. �These rules will so significantly deter the ability of first-time buyers to break in to the market that they will see a actual decline in home possession.�
For the unusual alliance, the first point of assault is on a proposal that would need sellers of mortgage-backed securities to retain part of the risk ought to a package of loans go sour. The sellers would must keep on their books at least three percent of the worth of any baskets of loans they purchase from lenders and then resell to investors. of the few exceptions to the requirement would be for mortgages on which the home buyer has made a deposit equal to twenty percent of the acquisition cost.
The preliminary proposals on �risk retention� by sellers of mortgage-backed securities are likely to have limited effect, largely because Congress provided an exemption for loans that are sold to the Federal Housing Administration and Ginnie Mae, the Government National Mortgage Association. Regulators need to extend that exemption to Fannie Mae and Freddie Mac. Those and other government-sponsored housing finance enterprises currently purchase about 90 percent of new mortgage loans made today.
Republicans in Congress and the Obama administration have vowed to get the government out of the mortgage business, letting the private market take over Fannie and Freddie�s functions of supporting the marketplace for home loans. But lenders and consumer advocates say any privatizations could disrupt lending, making matters worse and outweighing the protections they were designed to offer.
Any standards that apply to the private mortgage market will must be reflected in government housing finance entities that help low-income and minority borrowers, said Barry Zigas, director of housing policyowner for the Consumer Federation of The united states. �Are you going to tell taxpayers that the F.H.A. ought to have lower standards and take more risk than you expect private investors to take?,� they said.
Even the legislators who wrote the law on risk retention say that the proposal misses the mark. A bipartisan group of United States senators � Mary L. Landrieu, a Louisiana Democrat, Kay R. Hagen, a Democrat from North Carolina, and Johnny Isakson, a Georgia Republican � wrote to regulators last month that a necessary twenty percent deposit �goes beyond the intent and language of the statute.�
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