State treasurer sets out mortgage 'principles'

State Treasurer Richard Moore today called on mortgage brokers and lenders nationwide to clean up business practices that he said have hurt consumers and led to record defaults on home loans said.

Moore said he was speaking as a shareholder of mortgage stocks. He oversees North Carolina's $75-billion pension fund, which invests in corporations and governments globally, including some of the largest mortgage lenders and brokers. Returns from those investments help promise benefits to about 750,000 teachers, state and local government employees and retirees.

During a press conference in Raleigh, he unveiled a set of best practices for the mortgage industry that he said would protect homeowners from expensive and inappropriate loans and prevent future financial meltdowns such as those stemming from this year's mass default on mortgage repayments.

"These mortgage protection principles should become the new standard for responsible and respectable mortgage lending, and they should protect families from being stuck in loans they can't afford," Moore said. While Moore is advocating for tighter standards, he said the pension fund will not divest from companies due to noncompliance.

The principles include:

-Match qualified borrowers with appropriate and fair loans, not ones they can't afford.

-Verify borrowers' ability to repay all subprime loans.

-Assure that subprime loans with adjustable rates are affordable.

-Eliminate prepayment fees or penalties on subprime loans.

-Do not encourage brokers and lenders to match borrowers with higher-cost loans than they can afford.

-Provide borrowers with a fixed-rate option when presenting adjustable-rate products.