AARP Strongly Supports Sarbanes Predatory Lending Bill

AARP will strongly support a new bill that would put more teeth in federal regulations on predatory mortgage lending practices, Board Member Tess Canja announced at a Capitol Hill press conference Wednesday.

Canja, who has been president of the 35 million organization for the past two years, said that the bill, introduced by Senator Paul S. Sarbanes of Maryland, would provide a one-two punch by both expanding the number of loans covered and increasing the number of prohibited practices. The Sarbanes bill, sponsored by 14 other Senators as well, is similar to one introduced earlier by Congressman John J. LaFalce of New York, Ranking Member of the House Financial Services Committee.

"Too many of the most abusive lending practices and exploitive loan products remain unrestricted" Canja told the press conference, which was organized by Sarbanes to unveil his new bill. "It is time to take the next step."

Today's appearance by Canja was the second in less than a year that she has made to push AARP's fight against abusive mortgage lending practices. Last July, she testified on the issue before the Senate Committee on Banking, Housing and Urban Affairs, which is chaired by Senator Sarbanes.

Last year, AARP launched a national state-based campaign to fight predatory lending that is now underway in 25 states. The campaign links advocacy with a major consumer education initiative. With AARP's backing, a predatory lending bill recently was enacted in Georgia. Legislation also has been approved in California and the District of Columbia. AARP has pursued a number of legal initiatives, including participation in a predatory lending suit against First Alliance Mortgage Company of California that was settled by the company in March. Under the agreement, nearly 18,000 borrowers could receive as much as $60 million dollars in compensation.

In the past decade, sub-prime mortgage lending has developed as a way to enable individuals with impaired credit history to obtain or refinance home loans or to get home improvement loans. Predatory lending involves abusive practices used by some sub-prime lenders. Predatory lenders manipulate borrowers into taking loans marked by excessive costs that the homeowner often cannot afford to pay back.

Canja has emphasized that older American homeowners are particularly attractive targets for predatory lenders. Older homeowners are frequently targeted for mortgage refinancing and home equity loans because they are more likely to live in older homes that need repair, are not likely to perform repairs themselves, and are likely to have substantial equity in their homes to draw on, she has pointed out.

The key federal statute regulating abusive lending practices is the Home Ownership and Equity Protection Act (HOEPA) of 1994, which was approved in reaction to an increase in high cost lending.

At the press conference, Canja indicated AARP's "strong support" and specifically cited a number of provisions of the Sarbanes bill. She said key provisions will:

• lower the mortgage interest rate, and the points and fees threshold, that would trigger HOEPA consumer protections;
• restrict the financing of points and fees;
• prohibit the use of mandatory arbitration; and
• expand the civil remedies that would be available to an exploited borrower of a high cost loan covered by HOEPA.

Canja noted that AARP has been successful in getting the Federal Reserve Board to "exercise more fully its existing regulatory authority to reduce abusive lending practices."

AARP is a nonprofit, nonpartisan membership organization for people 50 and over. It provides information and resources; advocates on legislative, consumer, and legal issues; assists members to serve their communities; and offers a wide range of unique benefits, special products, and services for its members. These benefits include AARP Webplace at http://www.aarp.org/, Modern Maturity and My Generation magazines, and the monthly AARP Bulletin. Active in every state, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands, AARP celebrates the attitude that age is just a number and life is what you make it.