|HUD No. 00-142|
|Further Information:||For Release|
|In the Washington, DC area: 202/708-0685||2:30 p.m. Tuesday|
|Or contact your local HUD office||June 20, 2000|
HUD, TREASURY RELEASE JOINT REPORT RECOMMENDING ACTIONS TO CURB PREDATORY LENDING
Treasury Secretary Lawrence H. Summers and Housing and Urban Development Secretary Andrew Cuomo today released a joint HUD-Treasury report detailing recommendations on legislative, regulatory, and other steps to curb the increasing occurrence of predatory mortgage lending.
"These critical recommendations will
help protect American families from the abusive practices of some unscrupulous
lenders," said Secretary Summers. "Predatory lending practices
should have no place in the subprime market, or any other market."
Secretary Cuomo said: "Predatory lenders are greedily devouring families life savings and destroying good neighborhoods all across the country. We heard horror stories at our forums around the country about the suffering these lenders have caused, and Members of Congress have heard the same stories. We ask Congress to join us and move swiftly to give American homebuyers the protection they need from predatory lenders."
Based on information gathered at five field forums by the joint HUD-Treasury Task Force on Predatory Lending, the report, "Curbing Predatory Home Mortgage Lending," proposes a four-point plan to address predatory lending practices:
- Improve Consumer Literacy and Disclosures. Creditors should be required to recommend that
high-cost loan applicants avail themselves of home mortgage counseling,
disclose credit scores to all borrowers upon request and give borrowers
more timely and more accurate information as to loan costs and terms.
- Prohibit Harmful Sales Practices in the
Mortgage Market. Practices such as
loan "flipping" and lending to borrowers without regard to their
ability to repay the loan should be banned. New requirements should be
imposed on mortgage brokers to document the appropriateness of a loan for
high-cost loan applicants, and lenders who report to credit bureaus should
be required to provide "full-file" payment history for their
- Restrict Abusive Terms and Conditions
on High-Cost Loans. We recommend
that Congress increase the number of borrowers in the subprime market covered
by legislative protections; further restrict balloon payments on high-cost
loans; restrict prepayment penalties and the financing of points and fees;
prohibit mandatory arbitration agreements on high-cost loans; and ban lump-sum
credit life insurance and similar products.
- Improve Market Structure. Award Community Reinvestment Act (CRA) credit to
banks and thrifts that promote borrowers from the subprime to prime mortgage
market, and to deny CRA credit to banks and thrifts for the origination
or purchase of loans that violate applicable lending laws.
Senators Paul Sarbanes of Maryland and Charles Schumer of New York and Congressman John LaFalce of New York have all introduced important legislation to combat predatory lending.
"I want to commend Secretary Cuomo, Secretary Summers and the members of the Predatory Lending Task Force for their thorough and excellent work," said Senator Paul Sarbanes. "This report incorporates the key principles contained in the LaFalce-Sarbanes legislation and lays out a roadmap for action by the Congress and the regulators that will help put an end to these abusive practices."
Representative John LaFalce said: "The Task Force has made strong recommendations that -- if they are fully implemented -- can make a real difference in curbing abusive predatory lending practices. I am particularly pleased that the Task Force's report embraces the principal elements of the LaFalce-Sarbanes predatory lending bill introduced earlier this year."
Senator Charles Schumer, who recently released a report on predatory lending in New York, added: "It is clear that we need to focus a spotlight on predatory lenders whose sole purpose is to hijack the American dream from unsuspecting borrowers. We should leave no stone unturned to find and crack down on predatory lenders and Congress must pass the strongest legislation possible to end this pernicious practice."
While expanded access to credit from both
prime and subprime lenders has contributed to the highest homeownership
rates in the nations history, there is growing evidence that some
lenders are engaging in predatory lending practices excessive front-end
fees, single premium credit life insurance, and exorbitant prepayment penalties
that make homeownership much more costly for families that can least