Senators Feinstein and Martinez Oppose AIG’s Efforts to Undermine Federal Licensing Requirements for Mortgage Industry
- Rescued company’s lobbyists seeking weaker oversight and licensing standards –
Oct 17 2008
AIG has engaged in this lobbying effort despite the fact that the company recently received loans totaling $120 billion of taxpayer money, giving the federal government an 80 percent stake in the company. The Wall Street Journal published a story about AIG’s lobbying activities on October 16.
In a letter sent to AIG Chairman and CEO Edward M. Liddy today, Senators Feinstein and Martinez called on AIG to support the quick implementation of the strong mortgage industry standards established by the S.A.F.E. Mortgage Licensing Act of 2008.
Below is the complete text of the letter:
October 17, 2008
Mr. Edward M. Liddy
Chairman and Chief Executive Officer
American International Group, Inc.
70 Pine Street
New York, New York 10270
Dear Mr. Liddy:
We are writing to bring your attention to an urgent matter.
This week we learned that AIG’s lobbyists are opposing state action to strengthen licensing requirements for mortgage brokers and lenders. We are troubled that AIG is fighting against more robust oversight and regulation, given the company’s role in the credit crisis and financial market instability.
The current economic downturn is rooted in the foreclosure crisis. This crisis was stoked, in part, by abusive and predatory lending practices that were made possible by lax mortgage industry standards and oversight. Mortgage industry oversight varies from state to state, and the thin patchwork of regulation has not adequately protected consumers.
We introduced the S.A.F.E. Mortgage Licensing Act earlier this year to address this problem by establishing minimum national licensing standards for mortgage brokers and lenders. This legislation was included in the comprehensive housing reform bill that President Bush signed into law in July.
Our legislation gives states 12 months to ensure that mortgage brokers and lenders meet the following minimum criteria:
- No felony convictions in the last 7 years;
- No similar license ever revoked;
- Demonstrate a record of financial responsibility;
- Meet a minimum net worth or bonding requirement;
- Complete education requirements (20 hours of approved courses); and,
- Pass a comprehensive written exam.
Additionally, this bill creates a database of all licensed mortgage brokers and lenders, which allows prospective homebuyers to verify the qualifications of the broker or lender with whom they choose to do business.
Weakening these very basic requirements does not lend itself to a more stable and controlled mortgage industry. These are not onerous or unreasonable regulations. Nonetheless, the Wall Street Journal has reported that AIG has spent millions to lobby states to soften the licensing provisions, even after taxpayers loaned AIG more than $120 billion to prevent its collapse precipitated by excessive risk-taking. We find it unconscionable that AIG would take advantage of these taxpayer loans while paying lobbyists to rollback taxpayer protections against misrepresentations, deception, and fraud in mortgage lending.
Confidence in the housing market will not be restored if prospective homebuyers cannot be guaranteed the highest standards of service. When one buys 100 shares of stock, one deals with a licensed securities broker. However, for much larger investments, such as the purchase of a first home, one may be advised by an unlicensed independent contractor. While modest training, screening, and regulatory requirements may be appropriate for selling Tupperware door-to-door, this is not adequate for selling mortgage products worth hundreds of thousands of dollars to hard-working American families.
We hope AIG will immediately cease all efforts to undermine strong licensing and oversight standards for the mortgage industry.
Dianne Feinstein Mel Martinez
United States Senator United States Senator