Default Hearings Planned.(subprime lending)

WASHINTON -- The new Congress is gearing up to hold hearings on subprime lending and rising foreclosures which will put more pressure on federal regulators to tighten underwriting standards on subprime adjustable-rate products.

As the regulators consider expanding the nontraditional mortgage guidance to subprime 2/28 ARMs, they are going to have key Democrats breathing down their necks.

Senate Banking Committee chairman Chris Dodd, D-Conn., said last week that he is planning to hold hearings on subprime and predatory lending and the impact it has on minority and low-income borrowers.

"For these consumers, the American dream can truly become a nightmare," Sen. Dodd said at an annual Rainbow PUSH/Wall Street Project summit hosted by the Rev. Jesse Jackson and business leaders.

Sen. Dodd said too many subprime borrowers end up paying "unnecessarily high rates and fees and hidden backend costs. In the worst instances, homebuyers are slowly robbed of their homes' equity until they, and their families, end up in default and foreclosure." He did not announce a timetable for the hearings.

In the House of Representatives, the new chairwoman of the housing subcommittee is concerned that subprime lending is responsible for rising foreclosure rates and she is planning to hold hearings.

"Foreclosures are on the rise and most evidence points to predatory and subprime lending as a major cause," Rep. Maxine Waters, D-Calif., told a Women in Housing and Finance luncheon last week.