Black lawmakers submit predatory lending bills

By Robert "Rob" Redding Jr.

Publisher

Updated April 26, 2007, 6:30 p.m. - Rep. Elijah E. Cummings Tuesday presented legislation to address predatory lending practices.

"Owning a home is an essential component of the American Dream," the Maryland Democrat said. "Simply put, homeownership has the power to transform lives."

Meanwhile, Rep. Stephanie Tubbs Jones, an Ohio Democrat, today reintroduced her Predatory Lending Practice Reduction Act of 2007.

Cummings said predatory lending practices in the subprime mortgage industry has caused a surge in the number of foreclosures.

"I am concerned that this American Dream may be in jeopardy for millions of Americans," he said.

According to RealtyTrac, a real estate research firm, foreclosures increased by 42 percent from 2005 to 2006, to 1.2 million. That translates into one foreclosure for every 92 households.

Story continues below ↓

In addition, the subprime mortgage industry has grown from less than 8 percent of the total mortgage market in 2001, to approximately 20 percent of the market today, he said. Subprime mortgages, which target borrowers with low credit scores, often cost more than prime mortgages and include terms that allow payments to "balloon," or grow exponentially over time.  Further, predatory lending practices are common in the subprime mortgage industry, where borrowers are more likely to either have limited options available to them or to be unaware of their options.

Specifically, the legislation identifies the following goals for reform:

Strengthening federal regulations on predatory lending in the subprime mortgage industry;
Banning unfair and deceptive practices;
Requiring lenders to establish a borrower's ability to pay;
Increasing disclosure of alternative mortgage products;
Reducing or eliminating the prepayment penalty;
Identifying brokers and lenders with high rates of foreclosure; and
Mandating pre-loan counseling.

Rep. Jones' legislation calls for federal certification of mortgage brokers and agents and stiffer penalties for violation of federal law. Additionally, it will authorize funding for Community Development Corporations to provide training and education. 

"Predatory Lending is a leading cause of foreclosures across this country," she said. "It compromises the opportunity to own a home and hinders economic stability, creating greater disparities in wealth."

Return to ReddingNewsReview.com
© RCI 2007. All Rights Reserved.