Community Groups Urge Regulators to Act on Predatory Mortgage Lending

The Federal Reserve Board of Governors is convening a hearing June 16 in San Francisco on home mortgage lending abuses. And there are major problems to be addressed in California.

• Many borrowers are sold loans based on a stated income (often inflated by the broker), with no documentation to show the borrowers are able to afford the loan;
• Borrowers are sold loans with low initial rates that will drastically increase in the coming years, leaving unsuspecting borrowers unable to pay their mortgages;
• Loans are sold to non-English speakers who don’t understand the documents they are often pressured to sign for the loan;
• Borrowers of color are much more likely to get stuck with overpriced loans;
• And seniors are targeted for equity-stripping scams.

“Our State’s future economic success requires that every Californian have the chance to become a part of the financial mainstream,” said State Treasurer Phil Angelides. “Unfair interest rates and deceptive loan practices hurt those who can least afford it. I urge the Federal Reserve to do its part to ensure that every Californian has an equal opportunity to achieve the dream of homeownership.”

The California Reinvestment Coalition and its members have been invited to testify on panels at the hearing, which will take place at the Federal Reserve Bank of San Francisco on 101 Market Street. They will urge the Federal Reserve to:

• Include more overpriced loans within the protections of the Home Ownership and Equity Protection Act (HOEPA), the federal anti-predatory lending law.
• Restrict Yield Spread Premiums (fees lenders pay brokers for charging consumers more for their mortgages) and Pre-payment Penalty Provisions that charge borrowers thousands of dollars for refinancing out of bad loans.
• Protect consumers from unscrupulous lenders and brokers who take advantage of borrowers not fluent in English.
• Expand Home Mortgage Disclosure Act reporting requirements, so more data are available to better detect areas of discrimination.
• Require housing counseling before closing on any of the loans described above.

“Stronger federal protections for consumers are needed to address an explosion of ‘nontraditional’ loan products in the mortgage lending market,” said Heidi Li, Co-Founder of Housing and Economic Rights Advocates in Oakland. “Legal and consumer advocates, along with housing counseling agencies, find these products are often aggressively and deceptively pushed by brokers and lenders onto unsuspecting consumers.”

Kevin Stein, associate director of the California Reinvestment Coalition said, “The mortgage market is broken, and we need the Federal Reserve to clamp down on predatory lending that unfairly targets people of color, the poor, seniors, immigrants, and their neighborhoods.”

The hearing will take place from 8:30 a.m. – 4:00 p.m. Members of the public are invited to speak in an open microphone session at 3:00 p.m. The Federal Reserve will accept written comments until August 15, 2006.

Additional Endorsements:

Affordable Housing Services (Pasadena), Asset Policy Initiative of California (San Francisco), California Coalition for Rural Housing (Sacramento), Bet Tzedek Legal Services (Los Angeles), California Community Economic Development Association (CCEDA – Los Angeles), Center for Responsible Lending (Oakland), City of Oakland Civic Center Barrio Housing Corporation (Santa Ana), Community Housing Development Corporation of North Richmond Community Housing Opportunities Corporation (Davis), Consortium for Fair Lending (San Francisco), Consumer Action (San Francisco), Consumer Credit Counseling of SF (San Francisco), Consumers Union (San Francisco), East Bay Asian Local Development Corporation (Oakland), EPA CAN DO (East Palo Alto), Esperanza Housing (Los Angeles), Fair Housing of Marin (San Raphael), Housing Rights, Inc. (Richmond), Inglewood Neighborhood Housing Services (Inglewood), Lao Family Multilingual Homeownership Center (Oakland), Law Center for Families (Oakland), Legal Aid of Marin (Marin), Lenders for Community Development (San Jose), Los Angeles Neighborhood Housing Services (Los Angeles), Low Income Investment Fund (San Francisco), Mission Economic Development Agency (San Francisco), Monterey County Housing Alliance (MoCHA – Salinas), Nehemiah Community Reinvestment Fund (Sacramento), Neighborhood Works Homeownership Center Sacramento Region (Sacramento), NID Housing Counseling Agency (Oakland), Pamela D. Simmons, Attorney At Law (Los Angeles), Rural Community Assistance Corporation (Sacramento), Springboard Nonprofit Consumer Credit Management (Los Angeles), and SF Earn (San Francisco)

The California Reinvestment Coalition advocates for the right of low- income communities and communities of color to have fair and equal access to banking and other financial services. CRC has a membership of more than 240 nonprofit organizations and public agencies across the State.