PROTECTING OUR COMMUNITIES FROM PREDATORY LENDING PRACTICES ACT -- HON.
MAXINE WATERS (Extensions of Remarks - December 20, 2001)
[Page: E2393]
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HON. MAXINE WATERS
OF CALIFORNIA
IN THE HOUSE OF REPRESENTATIVES
Thursday, December 20, 2001
- Ms. WATERS. Mr. Speaker, today I rise to introduce the ``Protecting Our
Communities
[Page: E2394]
From Predatory Lending Act,'' much needed
legislation to prevent predatory lending. This year, my home state of
California became the third state in the nation to pass a law regulating
predatory lending practices. Reverse redlining or predatory lending
encompasses a number of lending practices that target minority communities,
employing interest rates and service fee charges that are significantly higher
than those prevailing in white communities. Such predatory lending practices
are prevalent in many areas across the country and federal action in this area
is long overdue.
- Home equity loans have historically been the privilege of the middle class
and wealthy, who generally have high credit ratings, income, and home equity.
However, beginning in the 1980s, non-depository finance companies--lending
institutions other than commercial banks, thrifts, and credit unions--began to
provide home-equity loans to lower-income communities, which were not served
by mainstream lenders.
- Persons in low-income communities typically have little disposable income,
but may have substantial home equity as a result of paying down their
mortgages or through the appreciation of their property values. This equity
can secure sizable loans. While offering loans to low-income and minority
communities can benefit these communities, predatory lending practices, which
oftentimes use the borrowers' home as collateral, have milked the last drops
of wealth from many of these neighborhoods, leading to increased poverty and
public dependence.
- My bill adds important protections to the law that will save many people
from losing their homes. My legislation would prohibit the industry from
making false, deceptive or misleading statements or engaging in unfair or
deceptive acts or practices, and prohibit blank terms in credit agreements
that are filled in after the consumer has signed. In addition, it would
prohibit prepayment penalties and the financing of credit insurance.
- My bill will prohibit the ``flipping'' of consumer loans, in which the
borrower refinances an existing loan when the new loan does not have a
reasonable, tangible benefit to the consumer. This practice of flipping often
costs the consumer thousands of dollars in fees and frequently leads to
foreclosure. My bill will eliminate the practice of charging fees for services
or products not actually provided. It will also prevent collusion between
lenders and appraisers or home improvement contractors by prohibiting direct
payments to home improvement contractors without a consumer cosignature and
prohibits creditors from influencing the judgement of an appraiser.
- My legislation will remove the shroud of secrecy that currently surrounds
the application process by requiring that a consumer receive disclosure of his
or her credit score and an explanation of the methodology used to calculate
the credit score, if one is used by the lender.
- My legislation will impose restrictions on late payments and apply
additional safeguards by lowering the threshold for high cost mortgages.
- Finally, my legislation will prohibit steering consumers into loans with
higher risk grades than the consumer would qualify for under prudent
underwriting standards. This is merely the latest in a long line of practices
that have targeted minorities and low and moderate income families, shutting
them out of the American Dream of homeownership.
- This problem is getting worse, not better. According to an ACORN study,
Separate and Unequal 2001: Predatory Lending in America, which was released
last month, African-American homeowners who refinanced in the Los Angeles area
were 2.5 times more likely to receive a subprime loan than white homeowners
were and Latinos were 1.5 times more likely to receive a subprime refinance
loan. And this is not merely a function of income: Upper-income
African-Americans and middle-income African-Americans were more likely to
receive a subprime loan than low-income white homeowners when refinancing.
Middle-income Latinos were also more likely to receive a subprime refinance
loan than low-income whites.
- We must continue to scrutinize predatory lending practices and protect
American consumers who are easy targets for the predatory lending industry.
Congress and federal agencies must recommit our efforts to ensure that greater
opportunity to credit access means an increase in quality of life, not an
increase in predatory lending and foreclosure. I will continue fighting on the
federal level until predatory lending is eliminated and the term will only
have relevance in history books. I encourage my colleagues to support my
legislation and look forward to working with you to eliminating this blight
from our communities.
END