Kolb: Sub-Prime Bailout Will Sink State Further Into Debt
Assemblyman Brian Kolb (R,C,I-Canandaigua) called yesterday’s “Foreclosure Prevention Act of 2008” a package of bills that would “sink our state further into debt.” Kolb points out that the legislative package, consisting of four separate bills, is “a plan to subsidize those living beyond their means at the expense of responsible taxpayers.”
“The sub-prime mortgage crisis has taken a heavy toll in New York State, where nearly 20 percent of the state’s revenue relies on Wall Street. With gloomy economic forecasts and our state in a particularly vulnerable position, reduced spending and demonstrating fiscal restraint should be our top priority,” said Kolb.
However, the Assembly Majority doesn’t seem to agree. They advanced four misguided bills addressing the sub-prime mortgage crisis to the Assembly floor for a vote. While the sponsors of the bills may have good intentions, their bills would have disastrous consequences, forcing our state further into debt by providing a financial bailout and enacting stringent regulations making it more difficult for residents to buy homes, explains Kolb.
The first bill, A.8972-C, aims to place limitations on home loans and prohibit certain practices. It would over-regulate sub-prime and nontraditional mortgage loans, thereby impeding the ability of banks to meet the credit needs of the communities they serve, including low- to moderate-income families.
The second bill, A.10083-A, would unfairly provide a bailout to lenders whose unscrupulous practices caused the foreclosure crisis in the first place, as well as to borrowers who knowingly borrowed more money than they could afford, by providing assistance in the form of taxpayer dollars for payments on behalf of borrowers to banks, counseling services, and legal services. For most families to benefit from this, the state would have to appropriate millions of taxpayer dollars – an exorbitant amount of money during a time of economic downturn.
The third bill, A.10219-A, creates a “mortgage applicant’s bill of rights,” but it contains errors in the context of the bill by claiming that the rights contained in this “bill of rights” already exist in state law when, in fact, this is untrue. Provisions of the bill would also only apply to state-chartered banks placing them at a disadvantage to federally chartered bank requirements.
The last bill, A.9695-B, would allow a court to delay an order to transfer title in a foreclosure proceeding for a year. This increases both the number of people eligible for assistance and its associated costs by defining “sub-prime home loan” just in excess of 7 percent - a figure that’s too broad. Additionally, prolonging the foreclosure process may result in deterioration of properties, or perhaps communities, since most people do not remain in their homes during the foreclosure process.
These measures are estimated to cost New York State taxpayers in excess of $200 million at a time when taxpayers are already overburdened with the state spending plan.
“These bills advanced by the Assembly Majority fail to properly address the problems associated with the foreclosure crisis. Increased state spending, a prolonged foreclosure process, implementation of burdensome and costly regulations, and having too broad a definition for ‘sub-prime home loans’ will only drive our state further into debt and increase the financial burden for taxpayers,” said Kolb. “The only way to truly prevent a mortgage crisis from reoccurring is by addressing the most fundamental problem – educating homeowners as to the risks associated with sub-prime loans.”