[Congressional Record Volume 153, Number 66 (Tuesday, April 24, 2007)]
[House]
[Pages H4030-H4031]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                           PREDATORY LENDING

  The SPEAKER pro tempore. Under a previous order of the House, the 
gentlewoman from Ohio (Mrs. Jones) is recognized for 5 minutes.
  Mrs. JONES of Ohio. Mr. Speaker, I am glad to join my colleague, Mr. 
Cummings, as he organizes this hour around predatory lending.
  I rise today to speak out against the issue of predatory lending 
within the subprime lending industry.
  I came to Congress in 1999, served on the Committee on Financial 
Services, and started instantly raising the issue of predatory lending 
practices. One of the things that we have learned is that all subprime 
lenders are not predatory lenders, but all predatory lenders are 
subprime lenders.
  Let me say it again. All subprime lenders are not predatory lenders, 
but all predatory lenders are subprime lenders. In fact, subprime 
lending has been a way in which many people who have been locked out of 
and left out of the credit area, or having an opportunity to have 
credit, have been able to come in. But what has come in with that 
practice are these predators who prey on our communities.
  I have heard from countless constituents in my district regarding 
this issue. As you know, as the gentleman from Ohio (Mr. Kucinich) 
said, Ohio has one of the highest rates of foreclosure in the country. 
Members of my community who have owned homes for years are being forced 
with foreclosure, after owning a home for more than 40 years in some 
cases.
  Seniors are being affected at a disproportionate rate. Lenders prey 
on seniors who have been in their homes all of their lives and have a 
substantial amount of equity in their home. They get them on the phone 
and say: ``Oh, Ms. Jones, do you need a new kitchen? Oh, I can help you 
get a new kitchen and it won't cost you any money. But, Ms. Jones, you 
might need a driveway also. Let me help you out.''
  And it goes on. So they enter into this agreement. They enter into 
these balloon and adjustable rate mortgages that look attractive and 
are affordable in their initial stages. However, after 2 years or more, 
these loans readjust to much higher payments with higher interest 
rates.
  For instance, one of my constituents is currently in an adjustable 
rate mortgage which locked in a payment of $1,088 for 2 years. After 2 
years, the mortgage payment increased to $1,488. And 3 months later, 
the payment increased to $1,715. This payment increase has had a 
significant impact on this individual's budget, and because they are 
not in a position to refinance, they are currently facing foreclosure. 
And that was one of the deals made in the early predatory lending 
situations.
  ``Oh, get it now. The interest rate is going to go down, and you will 
be able to refinance or purchase your house.'' The thing they don't say 
is often the appraisal far exceeds the value of the home, and if it 
exceeds the value of the home, by the time they get ready to refinance, 
they owe more on the home than the home is worth.
  Creating wealth is the most fundamental goal of minorities that seek 
economic equity. One of the first steps towards creating wealth is home 
ownership. The equity from owning a home is often the only means to 
secure funding for a new business, college tuition or retirement. I 
know my girlfriend, Barbara Lee, talked about her home was the way in 
which she started her first business.
  Predatory lending targets low-income and minority communities. It 
compromises the opportunity to own a home, and hinders economic 
stability, creating greater disparities in wealth.
  Mr. Kucinich went through a lot of the statistics with regard to 
predatory lending and issues that came through the Nonprofit Center for 
Responsible Lending, so I won't try and go after that again. But what I 
will say, predatory lending has expanded its reach beyond mortgage 
lending. Predatory practices are becoming increasingly prevalent in 
refund anticipation, auto and payday loans. There were over 12 million 
refund anticipation loan borrowers in 2003. That is where you go into 
the place and they say, ``Oh, you are going to file your taxes. Let me 
give you a loan on your taxes and you can get your money right now,'' 
and the interest rate is outrageous.
  Tax preparers and lenders strip about $1.57 billion in fees each year 
from the earned income tax credit paid to working families, according 
to a 2005 study.
  It is also estimated that predatory payday lending practices cost 
American families $4.2 billion annually. Understand that the reason 
that the payday loan people have been able to come into our community 
is because often some of the traditional lending institutions have left 
the community and people have nowhere to operate. There are people who 
never get a checking or credit account. They pay their bills in cash. 
How can that be in the United States of America, but it is true. They 
walk up and want to pay the phone bill and the light bill and gas bill.
  Anyway, I have been hollering, screaming, dancing about this issue 
since 1999. It is unfortunate that the only way we come to pay 
attention to this issue is when it begins to have an impact or threat 
to corporations and financial mortgage security industries in our 
country.
  The nonprofit Center for Responsible Lending projects that as this 
year ends, 2.2 million households in the subprime market will either 
have lost their homes to foreclosure or hold subprime mortgages that 
will fail over the next several years. These foreclosures will cost 
homeowners as much as $164 billion, primarily in lost home equity.
  It is also projected that one out of five (19 percent) subprime 
mortgages originated during the past two years will end in foreclosure. 
This rate is nearly double the projected rate of subprime loans made in 
2002, and it exceeds the worst foreclosure experience in the modern 
mortgage market, which occurred during the ``Oil Patch'' disaster of 
the 1980s.
  The nonprofit Center for Responsible Lending analyzed 15.1 million 
subprime loans from 1998 through 2006 and found that only about 1.4 
million were for first-time home buyers. Most were for refinancing. To 
date, more than 500,000 of those subprime borrowers have lost their 
homes to foreclosures. An additional 1.8 million are likely to follow 
as the market deteriorates. That's nearly 2.4 million lost homes.
  In Ohio the foreclosure epidemic went from bad to much worse last 
year as the number of new cases grew by nearly 24% from 2005. Cuyahoga 
county led the state in new cases with 13,610 new filings last year. 
This ranking has attracted national attention with Ohio's foreclosure 
rate currently at 18% which is higher than the national average of 17%. 
The problem has gone from bad to worse and from worse to regress in 
Ohio, with $7,479 filings in February 2007 alone.
  Predatory lending has expanded its reach beyond mortgage lending. 
Predatory practices are becoming increasingly prevalent in refund 
anticipation, auto, and payday loans.
  There were over 12 million Refund Anticipation Loan borrowers in 
2003. Tax preparers and lenders strip about $1.57 billion in fees each 
year from the earned-income tax credits paid to working parents, 
according to a 2005 study by the National Consumer Law Center.
  It is also estimated that Predatory payday lending practices cost 
American families $4.2 billion annually. In addition, research 
indicates that minorities pay on average $2,000 more

[[Page H4031]]

per vehicle purchased than nonminorities. Predatory auto lending is 
taking an estimated $2 billion dollars a year out of African American 
communities alone.

                          ____________________