Earlier this week, Consumers Union President Jim Guest joined Senators Menendez and Reed at a news conference in Washington to underscore how financial reform will benefit consumers.
Guest gave a forceful pitch for reform but the real star of the news conference was Gloria McAlpin, who we first met in 2008 when we produced our “Faces of Foreclosure” video series. As part of that effort, we interviewed Gloria’s husband Langdon, a disabled police officer from Loganville, Georgia, about the challenges they faced trying to keep their home.
Langdon has since passed away but Gloria continues to speak out about their experience. The McAlpins almost lost their home to foreclosure after they were sold an adjustable rate mortgage (ARM) that was supposed to bring their payments down but ended up costing 88 percent of their monthly income. Fortunately, they were able to reach a settlement to avoid foreclosure thanks to the help of the Atlanta Legal Aid Society.
For years, consumer advocates warned that subprime and other exotic mortgage lenders were putting homebuyers like the Langdons at risk because the loans they were offering were based on hidden costs and phony promises that made them impossible to pay off for many borrowers.
But federal banking regulators looked the other way and refused to take action until it was too late. Predatory mortgage lending went unchecked and millions of homebuyers got loans they couldn’t afford. The banks didn’t care because they bundled the loans and sold them as securities on Wall Street, passing along the risk to others. When the housing bubble burst and foreclosures became rampant, the whole house of cards came falling down and our economy virtually collapsed.
If we’ve learned anything from our recent financial crisis, it’s that protecting consumers is a critical component of protecting our economy. That’s why a strong, independent financial watchdog for consumers is so urgently needed.
Opponents of financial reform have allowed debate on the legislation to move forward but they are still working to weaken the measure, especially the proposal to create a new watchdog for consumers.
We need to keep the pressure on. Be sure to take action by urging your Senators to oppose any amendments that would undermine the proposed Consumers Financial Protection Bureau or the ability of states to help enforce the law and enact even stronger protections for consumers.