The nation's largest mortgage lender, Countrywide Financial Corp, should halt the aggressive marketing practices that put many borrowers into loans they could not afford, the head of a housing panel in the Senate said on Wednesday.
Charles Schumer, a New York Democrat, said Countrywide appears to have been driven by greed that motivated widespread, irresponsible lending that contributed to what could have been the largest home foreclosure crisis in our country.
Specifically, Schumer said Countrywide gave its loan sales force incentives to put borrowers into the most costly loans that would generate the biggest profits for the company.
We have learned that Countrywide's promise to get borrowers the 'best possible loan' have been nothing more than a commitment to squeeze every dollar possible from homeowners, said Schumer, who heads the housing panel on the Senate Banking Committee, during a press conference.
In fact, Countrywide's lending business model prioritizes fees and commissions over the financial viability of the loans.
A Countrywide spokesperson did not return a request for comment.
Many lawmakers have been critical of recent lending practices that saw mortgage brokers and lenders push many well-qualified borrowers toward subprime loans that cost much more, and have resulted in rising default rates.
In a separate statement Wednesday, Sen. Christopher Dodd, chairman of the Senate Banking Committee, said that all mortgage lenders and brokers should eliminate incentives that simply mean higher costs for borrowers.
It is not enough for Countrywide alone to reform their business practices. Every lender must be held to the same standards, the Connecticut Democrat said in a prepared statement.
Dodd has called for the Federal Reserve to ban predatory practices under its existing jurisdiction and has said that regulators have not yet done all they can under existing laws to end abuses.