SAN FRANCISCO - Community activists charged that the Federal Reserve has done the least among financial regulators to curb predatory lending.

At a public hearing held by the Fed in San Francisco Thursday, activists said the central bank has failed to use resources at its disposal, like data collecting and Community Reinvestment Act exams, to combat predatory activities.

And the effectiveness of the one weapon that the Fed has used the most - the Home Ownership and Equity Protection Act, often referred to as HOPEA - is questionable, several speakers at the hearing said.

Thursday's hearing was the last of three on the predatory lending issue held by the Fed this summer.

"The fact that the Fed is holding hearings without doing its own research raises serious questions about its interest in these matters," said Alan Fisher, executive director of the California Reinvestment Committee.

Mr. Fisher's group, which held a joint press conference with the San Francisco-based Greenlining Institute during the hearing, is advocating that the Fed conduct a study similar to one done by the Federal Reserve Bank of Boston in the early 1990s. That study found that bank lending practices discriminated against minorities.

Collecting data on the activities of subprime lenders, several of which are owned by banks, will help regulators and the public track occurrences of predatory lending at banking institutions, community groups say.

Predatory activities by subprime lenders have come under increased scrutiny over the last several months after news reports and lawsuits highlighted deceptive lending practices targeted at poor, elderly, and minority homeowners.

The Fed declined to respond to criticisms of its handling of the predatory lending issue. But in comments before the testimony, Federal Reserve Board Governor Edward M. Gramlich said the central bank was aware of the need to clean up lending practices.

"As regulators we tread a narrow line - we do what we can to stop the abuses but we don't want to stop subprime lending [altogether]," Mr. Gramlich said. The hearings, he said, were one way for the Fed to determine how it should use its regulatory powers to combat predatory lending.

In early July, responding to calls for more action, the Fed announced it would hold three public hearings - in Charlotte, N.C., Boston, and San Francisco - to discuss "ways the board might use its rule-writing authority to curb predatory practices in home-equity lending."

At the time, the central bank said it was considering expanding the range of loans subject to the Home Ownership Equity Protection Act to include loans with APRs 8 percentage points or more above Treasury yields.

Currently a loan has to have an APR of 10 points over Treasuries to be subject to the 1994 law, which mandates more disclosure to the borrower if the rate or fees for a mortgage are high.

In an interview preceding Thursday's hearing Robert Gnaizda, policy director and general counsel for the Greenlining Institute, said that lowering the minimum spread for Home Ownership Equity Protection Act loans to 8 points would not make a difference, because the Fed would still be ignoring much subprime lending that involves predatory practices.

If the Fed were to bring the threshold down to 5 points over Treasuries, "that would include 72% of closed-end home equity loans," he said.

And even as they advocated expanding the pool of loans included under the 1994 law, activists downplayed disclosure requirements as a tool to combat predatory lending.

Because illiteracy is high among subprime borrowers and loan agreements are generally hard to read anyway, "my experience is that disclosure has had very little effect, even though you have to have it," said Mary Lee Widener, chief executive officer of Neighborhood Housing Services of America.

Her view was echoed by John L. Bley, director of Washington State's the Department of Financial Institutions. He said predatory lending cases in his state show that deceptive practices often occur at the point when the borrower turns to the loan officer for explanation of the loan agreement.

"I am afraid that our experience in Washington is that HOEPA has had very little impact on predatory lending practices," he said.

Sandor E. Samuels, general counsel and secretary for Countrywide Home Loans Inc., the largest independent home lender, said that lowering the threshold would not only be ineffective but "would be a detriment because of the severe penalties" placed on institutions that inadvertently fail to make HOPEA-mandated disclosures.

"Banks will get out of the business," Mr. Samuels warned.

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