[Congressional Record Volume 153, Number 67 (Wednesday, April 25, 2007)]
[Extensions of Remarks]
[Page E856]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                THE ISSUE OF PREDATORY LENDING PRACTICES

                                 ______
                                 

                       HON. STEPHANIE TUBBS JONES

                                of ohio

                    in the house of representatives

                        Tuesday, April 24, 2007

  Mrs. JONES of Ohio. Madam Speaker, I rise today to speak out on the 
issue of predatory lending practices within the subprime lending 
industry.
  Madam Speaker, I have heard from countless constituents in my 
district regarding this issue. As you may know, Ohio has one of the 
highest rates of foreclosure in the country. Members of my community 
that I have known for years are being faced with foreclosure after 
owning a home for over 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 promote 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 $1088 for 2 years. After 2 years, the mortgage payment 
increased to $1488. Three months later the payment increased to $1715. 
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.
  Creating wealth is the most fundamental and important goal of 
minorities that seek economic equity. One of the first steps toward 
creating wealth is homeownership. The equity from owning a home is 
often the only means to secure funding for a new business, college 
tuition, or retirement. 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.
  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 modem 
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 percent 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 percent which is higher than the 
national average of 17 percent. 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 per vehicle 
purchased than nonminorities. Predatory auto lending is taking an 
estimated $2 billion dollars a year out of African American communities 
alone.
  Madam Speaker, I have been hollering about this issue since I came to 
Congress in 1999. It is unfortunate that the issue is being given some 
serious national attention only after posing a threat to corporations 
and financial and mortgage security industries. Last August, I along 
with the Financial Services Committee organized a field hearing in my 
Congressional District to hear from local officials and community 
representatives that work with this issue on a day-to-day basis. The 
hearing brought Ohio to the forefront of the foreclosure issue as it 
held rankings among the highest in the Nation.
  To continue in the fight, this week, I will be introducing the 
Predatory Lending Practices Reduction Act. This legislation serves to 
accomplish three main goals: 1) Establish a federal certification 
program to require mortgage brokers and other agents involved in 
subprime loan transactions to become certified and pass a written 
examination that covers, among other things, Federal law relative to 
Truth in Lending, Fair Housing, Equal Credit Opportunity Act and other 
Federal legislation. 2) Sets up minimum standards as they relate to 
providing information to consumers as well as best practices for 
dispute/complaint resolution; and 3) Creates civil penalties for 
violations of federal law pertaining to predatory lending; In addition 
it addresses appraisal fraud which has become increasingly popular 
among predatory practices.
  I commend Chairman Barney Frank of the Financial Services Committee 
on his commitment to working on this issue. I look forward to working 
with the Chairman and my colleagues on a solution to an issue that has 
devastated minority communities for over a decade.
  Thank you to my colleague Mr. Cummings for organizing this effort.

                          ____________________