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
- Gary Gensler, Under Secretary for Domestic Finance, Department of the Treasury
- Bill Apgar, Assistant Secretary for Housing-FHA Commissioner, Department of Housing and Urban Development
- Edward Gramlich, Governor, Board of Governors of the Federal Reserve System
* (35-page attachment on excerpts from Fed's 1998 report to Congress - Adobe Acrobat file)
- Ellen Seidman, Director, Office of Thrift Supervision
* (3-page affidavit attachment -- Adobe Acrobat file)
- John D. Hawke, Jr., Comptroller of the Currency, Office of the Comptroller of the Currency
- Donna Tanoue, Chairman, Federal Deposit Insurance Corporation
- David Medine, Associate Director of the Division of Financial Practices, Federal Trade Commission
- Thomas Curry, Commissioner of Banks, Commonwealth of Massachusetts, on behalf of Conference of State Bank Supervisors
* (7-page attachment from Washington State Dept. of Financial Institutions -- Adobe Acrobat file)
- Andrew G. Celli, Bureau Chief for Civil Rights, Office of the Attorney General for the State of New York
- Professor Cathy Lesser Mansfield, Associate Professor of Law, Drake University Law School
* (35-page attachment on distribution of mortgage rates and subprime mortgage lender delinquencies from SEC documents -- Adobe Acrobat file)
- John Taylor, President and CEO, National Community Reinvestment Coalition
* (28-page attachment on NCRC's Model of Anti-Predatory Lending Bill -- Adobe Acrobat file)
- Margot Saunders, Managing Attorney, National Consumer Law Center
- Gale Cincotta , National Chairperson, National People's Action
* (2-page attachment on foreclosures started by subprime lenders in Chicago -- Adobe Acrobat file)
- William Brennan, Jr., Director, Home Defense Program, Atlanta Legal Aid Society
(* Appendix A: List of Abusive Subprime Mortgage Lending Practices;
* Appendix B: Subprime Lenders Market Share of Refinancing Loans in 1998 in Atlanta Metro Made by All Lenders, by Census Tract -- Adobe Acrobat file;
* Appendix C: Fannie Mae and Freddie Mac Market Share of Conventional Loans in 1998, by Census Tract -- Adobe Acrobat file;
* Appendix D: Charlotte Observer (01.10.1993) - Complaints Arise Over Finance Firms)
- Gloria Waldron, ACORN, Brooklyn, New York
- 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