HUD Archives: News Releases

HUD No. 00-75
Further Information: For Release
In the Washington, DC area: 202/708-0685 1:30 p.m. Wednesday
Or contact your local HUD office April 12, 2000

Treasury Joins HUD in Co-Chairing Predatory Lending Task Force


View HUD Report: Unequal Burden: Income and Racial Disparities in Subprime Lending in America
View Accompanying Charts (requires PDF reader)

WASHINGTON - Housing Secretary Andrew Cuomo today released a study showing that the number of subprime home loans is skyrocketing in predominantly black neighborhoods and low-income neighborhoods. While expanded access to credit is critical, there is growing evidence that some lenders may be engaged in predatory lending that is making homeownership far more costly for blacks and poor families than for whites and middle-class families.

Cuomo released the study - Unequal Burden: Income and Racial Disparities in Subprime Lending in America - at the start of the meeting of a new Predatory Lending Task Force, and announced that Treasury Secretary Lawrence H. Summers will join him as co-chair of the Task Force.

Key findings of the Department of Housing and Urban Development analysis show that: 1) From 1993 to 1998, the number of subprime refinancing loans increased ten-fold. 2) Subprime loans are three times more likely in low income neighborhoods than in high-income neighborhoods. 3) Subprime loans are five times more likely in black neighborhoods than in white neighborhoods. 4) Homeowners in high-income black areas are twice as likely as homeowners in low-income white areas to have subprime loans.

"This study documents shocking disparities, showing that too many African American and poor working families have subprime home loans, which may raise their costs of homeownership," Secretary Cuomo said. "This raises concerns of widespread consumer fraud by predatory lenders. HUD and Treasury are now examining these issues and will report on this growing problem."

Secretary Summers said: "Greater access to capital, especially for those who traditionally have not had access to capital, is crucial for American families and the American economy. But it is essential that credit be provided in a transparent and non-exploitative way. That is why we will work on this Task Force to find ways of maximizing credit access while avoiding predatory lending."

"We need legislation that will prohibit the secondary market, Government Sponsored Enterprises, from purchasing predatory loans," Cuomo added. "We should define by legislation what is a predatory loan and the terms and conditions. This should not be a matter of GSE discretion.

The HUD study focused primarily on home refinancing loans, which account for 80 percent of subprime loans. Subprime lending involves providing credit to borrowers with past credit problems, who cannot qualify for the conventional prime market. Subprime lending can include predatory lending, which hits homebuyers with excessive mortgage fees, interest rates, penalties and pre-paid credit life insurance charges that can raise the cost of homebuying by thousands of dollars for individual families.


The study found that from 1993 to 1998:

  • The number of subprime home refinancing loans increased 10 fold to more than 790,000. In 1993, the subprime share of the overall mortgage market represented $20 billion. In five years, this volume multiplied more than seven times to $150 billion.
  • Subprime loans accounted for 51 percent of home loan refinancings in predominantly African American neighborhoods in 1998 - but only 9 percent in white neighborhoods. Comparable 1993 figures were 8 percent in black neighborhoods and 1 percent in white neighborhoods.
  • The racial disparity is so wide that 39 percent of families in high-income black neighborhoods received subprime home loans in 1998, while less than half that number of families in low-income white neighborhoods received subprime loans.
  • In low-income neighborhoods, subprime loans accounted for 26 percent of total loans in 1998 - compared with only 11 percent in moderate-income neighborhoods and just 7 percent in upper-income neighborhoods. Comparable 1993 figures were 3 percent in low-income neighborhoods and 1 percent each in moderate-income and upper-income neighborhoods.

The analysis points out that by providing loans to borrowers who do not meet the credit standards for borrowers in the prime market, subprime lending serves a critical role in the nation's economy. These borrowers may have blemishes in their credit record, insufficient credit history or non-traditional credit sources. Through the subprime loan market, they can buy a new home, improve their existing home, or refinance their mortgage to increase their cash on hand.

The study adds that prime lenders have made significant efforts and progress in reaching historically underserved markets and communities. However, based on the explosive growth of subprime lending in these neighborhoods, much remains to be done, in both the primary and secondary markets.

The HUD analysis is the first look at the most recent nationwide data on subprime lending broken down by the income and racial characteristics of neighborhoods nationwide. It is based on a study of nearly 1 million home loans.


Cuomo and Treasury Undersecretary Gary Gensler hosted a HUD-Treasury Task Force on Predatory Lending, which will hold hearings to determine how to eliminate predatory lending and then report to Congress. HUD and Treasury will:

  • Assess the relationship between the availability of prime loans and the growth of subprime lending in different types of neighborhoods, including low-income and minority neighborhoods.
  • Review existing state and local initiative to curb subprime lending and assess the merits of alternative strategies, including federal initiatives, to end predatory lending.

The Task Force On Predatory Lending includes Detroit Mayor Dennis Archer; Eric Belsky of Harvard University's Joint Center for Housing; Diane Casey of America's Community Bankers; Gale Cincotta of the National Training Institute-Chicago; Boise Mayor Brent Coles; Chicago Mayor Richard Daley; Tom Downs of the National Association of Home Builders; Martin Eakes of the Self-Help Credit Union; Debby Goldberg of the Center for Community Change; Roy Green of the American Association of Retired People; Los Angeles City Attorney James Hahn; Wade Henderson of the Leadership Conference of Civil Rights; Steve Kest of ACORN; Robert Lottstein of the National Association of Mortgage Brokers; Fe Morales Marks of Fannie Mae Corporation; Kwesi Mfume of the NAACP; Craig Nickerson of Freddie Mac Corporation; Baltimore Mayor Martin O'Malley; Joseph Piggs of American Bankers Association; Vincent Quayle of the St. Ambrose Housing Aid Center; Paul Reid of the Mortgage Bankers Association; Margo Saunders of the National Consumer Law Center; Peter Skillern of the Community Reinvestment Coalition of North Carolina; Ken Strong of the South East Community Development Corporation; Patricia Sturdevant of National Association of Consumer Advocates; John Taylor of the National Community Reinvestment Coalition; Karen Thomas of Independent Community Bankers of America; Denver Mayor Wellington Webb; Raul Yzaguirre of National Council of La Raza; and Jeffrey Zeltzer of National Home Equity Mortgage Association.

HUD and Treasury will host public forums in Baltimore, Chicago, Los Angeles, and New York. Task force members were also invited to suggest how best to structure these forums and to suggest participants with specific expertise on the topic.


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