HUD Sets Up Task Force On Predatory Lending

March 31, 2000

WASHINGTON - Calling it "the downside of an economic upturn" which has produced the highest homeownership rates in the nation's history, Housing and Urban Development Secretary Andrew Cuomo today announced that he will convene a national task force and hold hearings to determine how to "eliminate the nightmare of predatory lending from the American dream of homeownership."

In testimony before the Senate Appropriations Committee today, the Secretary said he would use authority under the Fair Housing Act and the Real Estate Settlement Procedures Act (RESPA) to convene a HUD Task Force On Predatory Lending and conduct publichearings in at least four cities to recommend strategies to combat predatory lending. The first hearing will be in Baltimore, which HUD also intends to use as an operational laboratory to examine and address predatory lending practices.

The growing trend of predatory lending in the booming subprime mortgage lending market has been well-documented by regulators, including the Federal Reserve and FDIC, academics and community groups. Evidence indicates that the vast majority of mortgage fraud and predatory lending activities - including excessive fees, provision of credit life insurance and prepayment penalties - occurs in the conventional subprime lending market. Subprime lenders generally do not make government-backed loans and often operate outside of the current federal regulatory structure.

This relatively new sector of the mortgage market is booming. HUD estimates that subprime loan volume has grown from $20 billion in 1993 to more than $150 billion in 1998.

"The economic boom which has produced the highest homeownership rate in history has a downside and that is predatory lending," Cuomo said. "Though HUD has moved aggressively to eliminate thousands of unqualified appraisers and dozens of lenders from FHA housing programs, the simple fact is that many of these same lenders and appraisers are in the conventional mortgage market often charging exorbitant fees, imposing onerous terms and saddling families with debts they'll never be able to retire. Just as HUD has moved to eliminate predatory lending from FHA programs, we must move and move now to eliminate them from the conventional market."

Baltimore, which has recently seen a significant increase in predatory lending abuses, will serve as the site of the first hearing and as a case study to understand how the practices subvert a real estate market and what steps can be taken to eliminate the practices. A complete hearing schedule will be released by HUD shortly.

HUD's Task Force On Predatory Lending will include Paul Reid of the Mortgage Bankers Association, Tom Downs of the National Association of Home Builders, Steve Kest of ACORN, Peter Skillern of the Community Reinvestment Coalition of North Carolina, John Taylor of the National Community Reinvestment Coalition, Gail Cincotta of the National Training Institute-Chicago, Ken Strong of the South East Community Development Corporation, Eric Belsky of Harvard University's Joint Center for Housing, Vincent Quayle of the St. Ambrose Housing Aid Center, Boise Mayor Brent Coles, Chicago Mayor Richard Daley, Denver Mayor Wellington Webb, Detroit Mayor Dennis Archer, and Los Angeles City Attorney James Hahn. Source: Department of Housing and Urban Development

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