By Howard Koplowitz
He told the TimesLedger about the plan, proposed by Senate Democrats, last week during a meeting with editors and reporters of the weekly chain.”At the end of the day, we're going to be worse than the savings and loan problem we had in the '80s,” Smith said about the growing subprime lending situation, noting that the “problem could escalate to a cost of $500 billion” nationwide.In Queens, Smith said between 4,000 and 5,000 homes are in danger of being foreclosed this year and between 14,000 to 20,000 in the city as a whole.”It's huge. It's like a homeowner tsunami,” he said.Hearings that Smith has conducted in his southeast Queens district, he said, have exposed what he called “redlining.” “What we're finding is that the mortgage bankers are actually steering people towards predatory loans” although they qualify for traditional loans, he said, pointing out it is predominantly blacks and Latinos who are getting the subprime loans.Looking at the broader implications that the spike in foreclosures and homeowners with subprime loans has on residents, Smith said the crisis means fewer citizens are paying taxes and using disposable income to shop while properties surrounding foreclosed homes depreciate in value.Smith said redlining begs for “enforcement mechanisms” against mortgage lenders.There are no regulations on the books making predatory lending illegal. Such laws would have to come from the federal government because it regulates banking.”The federal government has done nothing on this issue,” Smith said, although the state could pass the bills being proposed by Senate Democrats.Smith called the legislative package against foreclosures and subprime lending a “predatory lending mitigation program.”The proposed legislation would provide education to homebuyers about subprime loans in an effort to help them understand that interest rates jump a few years after the start of the loan, which usually has a low, so-called teaser rate.He said he would call on mortgage lenders to disclose terms of a subprime loan so prospective lendees would fully know what they were getting into.Smith also proposed a three- to four-month moratorium on foreclosures and a ban on the state doing business with mortgage banks that practice predatory lending.Reach reporter Howard Koplowitz by e-mail at hkoplowitz@timesledger.com or by phone at 718-229-0300, Ext. 173.
