Clinton Embraces Subprime Reform

I had said a few weeks ago that subprime lending would become a campaign issue. It has done so in spades.

Former Sen. John Edwards released a plan on lending as a larger part of policy speech on combating poverty several weeks ago that I covered. But subprime lending has affected more than just the poor.

Sen. Hillary Clinton (D., N.Y.) embraced subprime reform prior to an appearance at tonight's AFL-CIO forum in Chicago. Affordable housing has become a hot-button issue for unions in large cities across the country as middle-class families have been priced out of housing markets or fallen victim to unscrupulous lenders.

The Wall Street Journal and The New York Times ran articles announcing Clinton's new plan to address the subprime lending crisis preceding a speech she gave in New Hampshire this morning on how to protect America's dream of homeownership. Her campaign also issued a press release on the subject.

The plan announced today supplements the plan Clinton announced earlier this year to address the problems in subprime mortgages, and it includes the following points:

• Require mortgage brokers to disclose to borrowers that their compensation rises when borrowers' mortgage rates and mortgage fees are high.
• Work with states to develop strong licensing standards and require federal registration for mortgage brokers.
• Eliminate prepayment penalties on mortgage products.
• Require mortgage lenders to include the cost of taxes and insurance in the underwriting assessment of higher-risk mortgages.
• Establish a $1 billion fund to assist state programs that help at-risk borrowers avoid foreclosure.
• Expand Fannie Mae's(FNM Quote - Cramer on FNM - Stock Picks) and Freddie Mac's(FRE Quote - Cramer on FRE - Stock Picks) foreclosure prevention efforts.
• Establish a $1 billion fund to provide federal support to housing trust funds established by state, county and municipal governments.

I doubt much of this plan will be controversial. Many securities firms already license other financial experts, and there is no reason not to license mortgage brokers. A home represents a greater emotional investment than a stock.

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