The subprime mortgage industry is gearing up for an image change.

It's time for the business of lending to people with blemished credit records to improve its reputation in the public eye and its presence on Capitol Hill, executives said at the National Home Equity Mortgage Association convention here last week.

A newly formed government and public affairs committee will lead the charge for the trade group. It has hired Wright Andrews, a Washington lawyer, as its lobbyist, and it will move its headquarters from Southern California to Washington. Executive director Jeffrey Zeltzer will also relocate.

In addition, the group said it will establish its own political action committee and is strongly encouraging members to contribute. Currently, members make contributions to the American Financial Services Committee.

"I hope that everyone agrees that (the association) has to do something more than hold parties," Mr. Andrews told a sparse group of executives at a session on the subject. Although the conference boasted a record number of registrants, few seemed to attend educational sessions. "Networking is good," he said, "but the party can't go on without some changes."

His remarks came at a boom time for the lenders who cater to the unbanked. Flush with capital from Wall Street, veteran companies in this field are posting record originations and expanding at breakneck speed. Scores of newcomers have also joined the industry in recent years.

But dozens of class actions regarding lender payments to brokers have cropped up, and consumer activists have felled several subprime lenders.

The "poorly understood" industry is "under attack by greedy lawyers, ambitious politicians, and community activists," said Stanley Zimmerman, outgoing president. He encouraged lenders to contribute both time and money to the cause.

Players in the industry have a tough battle in front of them, said Joseph Lefkoff, an Atlanta lawyer who is the group's legal adviser, in a talk at an education session. He said he was "not optimistic" about the outcome of a class action filed against Crestar Mortgage Corp. and Saxon Mortgage Corp., both based in Richmond, Va.

"There's no realistic hope that we're going to get any relief from HUD, although Congress is a possibility," he added. Lenders have been looking to the Department of Housing and Urban Development for a clarification of the Real Estate Settlement Procedures Act, which recent lawsuits allege they violated.

Although Dan Phillips, chairman of Firstplus Financial, did not attend either session, he must have gotten at least part of the message. The Dallas lender contributed $60,000 to the American Financial Services Committee the last night of the meeting.

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