While the DC Department of Insurance, Securities and Banking (DISB) cannot completely remove the problem, it has taken some major steps toward helping consumers deal with the economic fallout from the subprime mortgage lending market.
 
Since 2007, at the beginning of the subprime lending mortgage crisis, the agency has sought ways to assist District residents using various multilayered approaches. The agency used a blitz of publicity, seminars and workshops to keep District residents informed about their options and their rights.
 
The surge of subprime mortgage lending caused by reductions in loan underwriting standards led to problems including loan defaults and foreclosures in the District of Columbia. Subprime mortgage loans have higher costs (such as higher interest rates) than prime mortgage loans primarily due to borrowers’ lower incomes, poor credit histories, high loan-to-home value ratios or other underwriting factors that would disqualify them from being eligible for lower cost, prime rate mortgage loans. Because of the nature of these loans and the financial situation of many subprime borrowers, a significant number of home foreclosures were unavoidable since the income levels needed to support the mortgage never existed in many cases, according to DISB Commissioner Thomas E. Hampton.
 
On June 30, DISB released a study, Subprime Mortgage Lending in the District of Columbia, which it commissioned from several nonprofits. It revealed that subprime loans disproportionately went to single, low- and moderate-income households in wards 4, 5, 7 and 8. The study showed that those who had subprime or high-cost mortgages were more likely to be delinquent, which resulted in more home foreclosures in certain communities.
 
The agency had been targeting these more vulnerable populations with its public forums on subprime lending and mortgage default prevention. The agency also hosted several mortgage-related information sessions and workshops where staff handed out information and helped consumers with their problems.

Even further, DISB recently created a Foreclosure Mitigation Kit, which it released to the public mid-July. The kit is targeted to District residents who may be having trouble keeping up with mortgage payments, or who may be facing foreclosure of their homes.

“We hope this kit will provide sufficient information and options for those residents who are experiencing problems paying their mortgages,” Hampton said. “The effect that foreclosures have on our community is a major concern in the District of Columbia and we want to mitigate this issue before it affects all facets of the economy.”
 
The kit—a direct response to the findings in the subprime mortgage lending study—is a step-by-step guide for consumers on what to do if they are facing foreclosure. In easy-to-understand language, it describes what happens during the pre-foreclosure and foreclosure phases, loan refinancing, how to prevent foreclosure, and what to do after the home has been saved. The kit also includes several pieces of materials from federal government agencies such as the Department of Housing and Urban Development and the Federal Reserve Board.

DISB will provide several kits to the constituent services offices of the Council of the District of Columbia. Also, it may be found on the agency’s website at disb.dc.gov.

For questions about mortgages, please contact DISB at (202) 727-8000 and ask for the Banking Bureau.