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Bennett defends subprime loans
by Tom Busselberg
Mar 26, 2007 | 120 views | 0 0 comments | 1 1 recommendations | email to a friend | print
WASHINGTON, D.C. -- "Subprime lending has done a great service to a lot of people who would not be able to get into homes of their own without it." Sen. Bob Bennett was involved in a Senate Banking Committee hearing on the issue late last week. He discussed it during a statewide telephone press conference from the nation's capital that included the Clipper Friday.

"People are confusing subprime lending with predatory lending," he said. "There are predatory practices that are already illegal or very close to it that should be reined in, but all subprime lending is not predatory.

"As long as prices were rising dramatically around the country, there was no risk in subprime," Bennett said. "For someone who is not in the best condition to pay the loan back, but still needs the house, if the value of the house goes up, there are no problems.

"But if the value goes down, they could lose the house," he said. "That's what has started to happen."

"With every boom, whether it's Tokyo real estate in the 80s, or dotcom stocks in the 1990s, or housing prices in the mid 2000s, every time something goes up more rapidly than it should, and people believe it's always going to go up, you get people who overextend themselves," the senator said.

"It's not only home buyers but mortgage lenders who probably made loans they shouldn't have," he said.

"One of the things we need to do, as a country, is to get mortgage holders to be fairly realistic and work out the relationships," Bennett said. "That's whether the federal government plays a role or not.

"We want to minimize the number of people who lose their homes. We'd all be better off if we could find a way to keep them there, even if it means stretching things out to make it easier for them to stay," he said.

"Whether we will have to make a change in the law, it's too early to tell," Bennett said.

"I'm not one who believes subprime lending problems are going to trigger a major stock crash. We did see the stock market drop fairly dramatically, but it has recovered," he said.

The Dow Jones stock average tumbled by about 500 points a few weeks ago. "We've seen the stock market recover, and the Federal Reserve Bank said the economy is still fairly sound," Bennett said.

"Certainly (the economy is strong) in the state of Utah, where unemployment is the lowest on record, certainly not lower than since the 50s and the post war boom," he said.

"You can't find any year where the employment situation was as tight as it is now. That's a sign business is very good. If you want a job, there's one for everybody," Bennett said.

According to an Associated Press story, "federal regulators said they lacked authority over expanding areas of the high-risk mortgage market."

Lawmakers questioned whether the federal officials were lax and helped fuel the spike in delinquent payments and foreclosures, the article continued.

"Some of the biggest companies in the so-called subprime mortgage market also were called to account as turbulence swirls in the market, recently roiling Wall Street and helping produce the biggest drop in four years in the Dow Jones average," the article said.
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