Congress to probe subprime real estate loan fraud
May 23, 2005
House Subcommittees focus on predatory lending
The Congressional Subcommittees on Housing and Community Opportunity and Financial Institutions and Consumer Credit, chaired by Rep. Robert W. Ney, R-Ohio, and Rep. Spencer Bachus, R-Ala., respectively, will hold a joint hearing tomorrow on predatory and abusive mortgage lending practices, particularly in the subprime market, and current legislative proposals to eliminate such practices.
Millions of Americans are unable to qualify for the lowest mortgage rates available in the prime market because they have less-than-perfect credit or cannot meet some of the tougher underwriting requirements of the prime market. These borrowers, who generally are considered to pose higher risks, rely on the subprime market, which offers more mortgage products to meet customers' varying credit needs and situations. Subprime borrowers pay higher rates and servicing costs to offset their greater risk. Nationally, subprime mortgage originations have skyrocketed since the early 1990s, according to a press statement.
"Uniform standards in the marketplace are essential if the primary and secondary markets are to continue to serve as a vital source of liquidity to make mortgages available to home buyers with less-than-perfect credit," Subcommittee Chairman Bachus said in a statement.
Although subprime lending has increased access to credit to those with less-than-perfect credit and low-to-moderate-income borrowers, it has also in some instances increased abusive lending practices that have targeted more vulnerable populations, such as minorities and the elderly. Specific terms or practices that many associate with predatory lending include excessively high interest rates and fees, balloon payments, high loan-to-value ratios, excessive prepayment penalties, loan flipping, loan steering, and unnecessary single-premium credit insurance.
Scheduled to testify at tomorrow's hearing are Joseph A. Smith Jr., North Carolina Commissioner of Banks; Stella Adams, board of directors, National Community Reinvestment Coalition; Martin D. Eakes, chief executive officer, Center for Community Self Help; Micah S. Green, president, The Bond Market Association; Regina Lowrie, president-elect, Mortgage Bankers Association; Steve Nadon, chief operating officer, Option One Mortgage, on behalf of the Coalition for Fair and Affordable Lending; Lisa Bouldin-Carter, national executive director, BorrowSmart Public Education Foundation; Martina Guilfoyle, Inglewood Neighborhood Housing Service Inc.; Alan E. Hummel, chief executive officer, Iowa Residential Appraisal Co., on behalf of the Appraisal Institute; Donald Kidd, president, Western Commerce Bank; and Jim Nabors, president-elect, National Association of Mortgage Brokers.
Copyright 2005 Inman News