Predatory Mortgage Lending
Recipient: House Committee on Financial Services
Dear Chairman Oxley, Ranking Member Frank, Chairman Bachus, and Ranking Member Sanders:
Predatory mortgage lending is an unethical practice that threatens decades of work by the civil rights community to increase minority homeownership and build wealth in disadvantaged communities. Because many of the constituencies represented by our organizations are the primary targets of the proliferation of predatory lending practices, we write in support of comprehensive protections that must be embraced by any proposed anti-predatory legislation. As the U.S. House of Representatives Committee on Financial Services moves to consider such legislation, we take this opportunity to reiterate our commitment to protecting the civil rights of our constituencies.
As you know, African Americans, Latinos, Asians, Native People, immigrants, the elderly, women, people with disabilities, and individuals who live in poor and underserved neighborhoods are often the targets of abusive lending tactics. The consequences of financial loss, and possibly even foreclosure, are devastating for the families and their neighborhoods. Since the predominant wealth-generating asset in the U.S. is homeownership, predatory lending in our communities means that those individuals who face a wide array of discriminatory barriers are deprived of the many benefits associated with homeownership and neighborhood stability.
Current research indicates that minorities are as much as twice as likely to receive a higher-cost loan than their similarly situated peers, even after controlling for income, presence of a coapplicant, and other typical loan characteristics. In addition, female-headed and elderly households are also heavily targeted by abusive lenders and often receive subprime financing despite their ability to qualify for prime. Although not all subprime loans are predatory, the abusive practices that are of our concern take place largely in the subprime market. Moreover, many members of our constituencies have less experience with the mainstream mortgage market than others and therefore are more easily exploited by abusive practices. Therefore, any proposed legislative language would be considered inadequate if it did not address the needs of our communities. In addition, it must include the following:
• Improve protections for all families. Congress must advance the level of protections available for all potential buyers and homeowners regardless of income, credit status, or mortgage product. The “Prohibit Predatory Lending Act,” H.R. 1182, is a first step in securing such protections. Families that use alternative ownership options such as mobile and manufactured housing and seller-driven financing; are credit impaired; have little or no credit histories; have limited English capabilities; and are located in rural, urban, or high poverty areas or on reservation lands must not be left out.
• Ensure access to courts and justice for victims. For many families unfortunate enough to become victims of predatory lending, the current options for recourse are inadequate. Some families are left without a way to defend their home, refinance their mortgage, or save themselves from impending foreclosures. Further, some predatory home loans still include mandatory arbitration, which limits a victim’s access to the courts. As a consequence, borrowers do not have the benefit of judicial review, the weight of precedence, the right of discovery and transparency, or the availability of injunctive relief or punitive damages, among other basic due process considerations.
• Guarantee equal access to fairly-priced credit. Many vulnerable families find themselves unfairly steered toward subprime loans despite their ability to qualify for more favorably priced products. Low accountability standards for third-party agents, such as real estate and mortgage brokers, and built-in incentives for driving up the cost of the loan contribute to this problem. We call upon the mortgage industry to take responsibility for such practices and improve their own systems. However, Congress also has a responsibility to ensure that families are protected from unethical steering practices.
We applaud your efforts to connect vulnerable families with meaningful protections. As the dialogue moves forward, the needs of our respective communities must be taken into consideration. We stand ready to work with you to create a comprehensive anti-predatory lending law that will protect consumers while preserving market operations.
Thank you for your consideration. If you have any questions, please feel free to contact Janis Bowdler, NCLR Housing Policy Analyst, at 202-776-1748, or Rob Randhava, LCCR Counsel, at 202-466-6058.
Leadership Conference on Civil Rights
American Association of People with Disabilities
American Association of University Women
American Federation of Government Employees
Americans for Democratic Action
Asian American Justice Center
Asian Pacific American Labor Alliance
Center for Responsible Lending
Church of the Brethren Witness, Washington Office
Cuban-American National Council
First Nations OWEESTA Corporation
Housing Assistance Council
Jewish Labor Committee
International Brotherhood of Teamsters
Lawyers’ Committee for Civil Rights Under Law
League of United Latin American Citizens
Mexican American Legal Defense and Educational Fund
National Advocacy Center of the Sisters of the Good Shepherd
National American Indian Housing Council
National Association for the Advancement of Colored People (NAACP)
National Association of Black Social Workers, Inc.
National Association of Human Rights Workers
National Association of Neighborhoods
National Community Reinvestment Coalition
National Congress of American Indians
National Congress of Black Women
National Consumer Law Center
National Council of La Raza
National Fair Housing Alliance
National Federation of Filipino American Associations
National Partnership for Women & Families
National Puerto Rican Coalition, Inc.
National Urban League
National Women’s Law Center
NETWORK: A National Catholic Social Justice Lobby
New Jersey Institute for Social Justice
Presbyterian Church (U.S.A.), Washington Office
Puerto Rican Legal Defense and Education Fund
Service Employees International Union
The Workmen’s Circle/Arbeter Ring
Unitarian Universalist Association of Congregations
United Food and Commercial Workers International Union