|HUD No. 00-93|
|Further Information:||For Release|
|In the Washington, DC area: 202/708-0685||9: 30 a.m. PDT Tuesday|
|Or contact your local HUD office||May 2, 2000|
Analysis of Subprime Lending in Los Angeles Released at Forum
HUD AND TREASURY HOLD SECOND OF FIVE REGIONAL FORUMS NATIONWIDE TO ADDRESS PREDATORY LENDINGView HUD Report: Unequal Burden in Los Angeles: Income and Racial Disparities in Subprime Lending
LOS ANGELES - The U.S. Department of Housing and Urban Development and the Department of the Treasury today held the second of five joint regional forums to address predatory lending.
While expanded access to credit from both prime and subprime lenders has contributed to the highest homeownership rates in the nation's 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 afford it.
HUD Secretary Andrew Cuomo said: "The good news is that homeownership is at record levels. The bad news is that so too is predatory lending, particularly in elderly, minority and low-income communities. Predatory lending falls hardest on families who see the equity in their home disappear and, in some instances, lose their homes altogether. It also is hard on bankers and lenders whose good reputations are tainted by predatory lenders. Our forums and our report to Congress will identify how we can best protect these families' pocketbooks and preserve these lenders' reputations against those who would turn the dream of homeownership into a nightmare."
Treasury Secretary Lawrence Summers said: "We must not let the abusive practices of some lenders undo the enormous progress that families have made thus far. Abusive practices should have no place in the subprime market, or any other market."
Personal testimony about specific instances of predatory lending in California was offered at the forum. Last week, a joint HUD-Treasury forum on predatory lending was held in Atlanta. Forums will be held in May in New York, Chicago and Baltimore.
At the forum, HUD released a study - Unequal Burden in Los Angeles: Income and Racial Disparities in Subprime Lending in America - that analyzed data reported under the Home Mortgage Disclosure Act. Reflecting national trends, it found that: 1) From 1993 to 1998, the number of subprime refinancing loans increased by about 170 percent in Los Angeles. 2) Subprime loans are two times more likely in low-income neighborhoods than in high-income ones. 3) Subprime loans are almost four times more likely in black neighborhoods than in white ones. 4) Homeowners in moderate-income black areas are almost twice as likely as homeowners in low-income white areas to have subprime loans.
The HUD study focused primarily on home refinancing loans, which account for nearly 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 help to expand access to credit for more Americans. However, some lenders may engage in predatory or abusive lending practices that can hit homebuyers with excessive mortgage fees, interest rates, penalties and pre-paid credit life insurance charges, loan flipping, or home improvement scams that can raise the cost of home ownership for families.
Later this summer, following the conclusion of the five joint HUD-Treasury hearings, Secretary Cuomo and Secretary Summers will issue a joint report with recommendations on how to address these problems. At the hearing today were some of the 28 members of the HUD-Treasury Task Force on Predatory Lending, comprised of housing experts, lenders, elected officials, bankers and consumer advocates as well as other national experts and participants from the region.
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.