Committee on Banking and Financial Services
James A. Leach, Chairman
Anti-Predatory Lending Precepts

Source: U.S. House of Representatives, James A. Leach
May 24, 2000

It seems to this gentleman that there are certain basic precepts that should be considered as part of addressing predatory practices:

  • Consumers deserve meaningful and clearly understandable disclosures of loan agreements so that borrowers are informed, rather than confused, by all of the paperwork before them.
  • Lenders shall not extend credit to a borrower unless they have applied appropriate analysis to determine that the borrower is capable of repayment on the terms of the loan.
  • Lenders should not require a borrower to finance points and fees associated with a high-cost loan. The consumer should receive a clear disclosure that the financing of points and fees is optional.
  • A lender should not charge a borrower points or fees to renew, extend, or otherwise modify a high cost home loan, if after the modification the loan remains a high cost loan; or if it is no longer a high cost loan the APR has not been decreased by at least 1.5 percentage points.
  • Lenders shall not use misleading or deceptive sales and marketing practices that induce consumers to enter loan agreements that they cannot afford.
  • Attempts to curb abusive practices should not be made at the expense of credit availability in under-served neighborhoods.
  • Frequent refinancings, or "loan flipping," which unnecessarily increase the loan balance and eliminate equity should not be acceptable. Points and fees associated with refinancing of a high-cost loan should result in a net-benefit to the borrower.
  • Greater efforts should be undertaken to educate the public about borrowing. For example, consumers must be able to easily comprehend that a drop in their monthly payments may not translate into owing less over the long term, and may in fact increase their overall costs.
  • Lenders should provide disclosures, prior to closing, which encourage consumers to seek credit counseling.
  • Regulators should take necessary measures to ensure that an institution's CRA rating does not improve as a result of loans that were made to low- and moderate-income individuals, but have predatory terms.
  • The secondary market should not be a facilitator of predatory lending, but should take measures to ensure that loans which contain predatory terms are not purchased.

Witness List For Full Committee Hearing on Predatory Lending Practices
Including Hyperlinks to Statements from Regulators and Industry Sources

Source: U.S. House of Representatives
May 24, 2000 Panel I

Panel II

Panel III

Panel IV

  • Steve Bartlett, President, The Financial Services Roundtable
  • David Bochnowski, Chairman, President and CEO, Peoples Bank, Munster, Indiana, First Vice Chairman, America's Community Bankers
    * (America's Community Bankers Housing Opportunities Statement of Principles - Adobe Acrobat file)
  • Ralph Rohner, Professor of Law, Catholic University, on behalf of Consumer Bankers Association
  • George Wallace, Partner, Eckert Seamans Cherin & Mellott, LLC, on behalf of American Financial Services Association
  • Martin Eakes, President and CEO, Self-Help Credit Union
  • Laura Borrelli, President, Barrister Mortgage and Investment, on behalf of National Home Equity Mortgage Association
  • Neill Fendly, President Elect, National Association of Mortgage Brokers

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