The current system does not allow that to occur because it dis- guises all that information. And ultimately the chairman of Fannie Mae said the same thing. He said he recently bought a house, signed his name 45 times, and found four forms he could not online loans for bad credit in Kansas un- derstand in the process.
Last, we said the uniform national standard created — that affects all lenders the same nationwide. But part of that process was the licensing of mortgage brokers and bringing them into a regulatory constraint of some time so that — we thought that that also, testing the same things that we have heard from them today, would help the process online loans for bad credit in Kansas substantially. And I do not want to abuse my privilege as the temporary chair, but I will get a little more time. Senator Mendendez deserves time and kudos for patience. Henderson, I want to have you weigh in on this but again, there is a question that we can deal with today or you can submit more testimony, written testimony for the record. But what is wrong with a fiduciary duty for mortgage brokers?
What is wrong with faith and fair dealing for all originators? I do not think you heard me disagree with any of those. I mean, I think they are pretty basic and they are usually part of every faith and fair dealing and real estate transaction right now with banks. Our industry, I mean, again, depending on a fully index rate, it de- pends on how you define a fully index rate. I am saying there are parts of this that I like very much. Look Senator, we would support the three rec- ommendations that Mr. But they are not re- sponsive to the problem of the crisis in subprime lending. Robbins never mentioned, for example, the elimination of prepayment penalties. That really load some of these loans with pen- alties that borrowers are simply unaware of and simply cannot af- ford to pay. He did not talk about, for example, eliminating the yield spread premium with respect to bonuses that mortgage bro- kers may get.
While he supports licensing and some element of reg- ulation, you did mention that, it was not part of the three essential elements that he listed as his recommendations which we think are especially important. In our view, there is something more that is needed beyond the kind of voluntary compliance that we have talked about here today. We are not interested in trying to over regulate the market.
We do not believe that the market works best under the heavy thumb of regulation. But what we are seeing here today certainly is the op- posite of the notion of some regulatory interference in the market. We have seen an absence of regulatory involvement, an abdication of the spirit if not the letter of the way in online loans for bad credit in Kansas which these laws are to work together in an integrated fashion to ensure a fair market- place. There is a touch of caveat emptor, let the buyer beware, in terms of how this process works. And the crisis we are seeing today is an example of that. That is one of the reasons that we have urged for a very modest temporary moratorium, a voluntary moratorium, on the part of the lenders who are holding the bulk of these subprime loans that are scheduled to be triggered in a way that will be harmful.
We think taking a deep breath, allowing some effort to coordinate the vol- untary efforts that individual lenders have taken, is an important step. We have not argued the need for regulation immediately to ex- amine this issue. But the failure of the industry collectively to come to terms with the nature of this crisis leaves us no choice but to recommend some level of intervention beyond what we have seen. That is one of the reasons we think your bill is such an im- portant tool and we hope that Congress moves immediately to try to enact it. But we are also hoping that the industry itself will come to terms with the fact that it needs to do more than the kind of voluntary efforts which have been undertaken, which are not really responsive to the entity of the problem. I want to let Senator Menendez — I will come back, because I have got more. I just want to pursue three different things as quickly as pos- sible. Calhoun, I understand that that potentially can result in about 2 million families losing their homes. Our projection is that one in five of those the borrower will lose their home before that loan is refinanced or paid off.
And that would mean roughly how many people or families?
And then, the numbers are not clear as to — there is not good data as to how many of those borrowers refinance into new subprime loans. He gave an example of some very limited data that was only for lenders and it did not include brokered loans, which tend to refinance more often. But if you assume that 40 percent of these borrowers, this is what we did in our study.
If you assume 40 percent of the bor- rowers graduate to a better prime loan or fixed rate at the end, rather than refinance into another subprime loan, you end up with over one in three of these borrowers losing their homes before they escape the subprime market.
And I do not think we can — if there are two points that we come out of here with, one is again, following up with Mr.