[Congressional Record Volume 153, Number 68 (Thursday, April 26, 2007)]
[Extensions of Remarks]
[Pages E864-E865]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                            SUBPRIME LENDING

                                 ______
                                 

                             HON. JOE BACA

                             of california

                    in the house of representatives

                       Wednesday, April 25, 2007

  Mr. BACA. Madam Speaker, I ask for unanimous consent to revise and 
extend my remarks. As the Chair of the Congressional Hispanic Caucus 
and as a member of the House Financial Services Committee, I consider 
helping ensure equal access to homeownership for all Americans a high 
priority of mine.
  Therefore, I've grown increasingly concerned over the past several 
years about the disproportionate amount of higher priced subprime 
lending that is concentrated in the minority population and in minority 
neighborhoods. According to the 2005 HMDA data, 52% of African 
Americans and 40% Latino are in high-cost, subprime loans as compared 
to 19% of white families. I wonder whether some or most of these 
families could have qualified for a better, more affordable loan but 
were instead steered into a subprime loan by a lender or broker eager 
to make a profit.

[[Page E865]]

  To be fair, not all brokers and lenders are bad and even subprime 
lending has value for some borrowers. The House Financial Services 
Committee has held two hearings this year on the issue of predatory 
lending and we are currently assessing legislative solutions.
  The research shows that while hybrid adjustable rate mortgages and 
other subprime loans may be appropriate for some families, they are not 
suitable for others. We're concerned that the lending abuse in the 
market has become a very serious problem.
  The subprime market has seen significantly higher levels of 
foreclosure and default than the prime market, and the rates of 
foreclosure and default are rising. For Hispanics, almost 20 percent 
who received high-interest, subprime loans are likely to go into 
foreclosure. Specifically, 73,000 out of 375,000 subprime loans made to 
Hispanics in 2005 are likely to foreclose. And the Center for 
Responsible Lending predicts subprime mortgages originated from 1998 
through third quarter of 2006 will wipe out $164 billion in 
homeownership wealth for 2.2 million American families.
  In my district in California, the Neighborhood Housing Services of 
the Inland Empire reports that the foreclosure rate is now 3 times 
higher than it was just 1 year ago. Now 1 of every 315 homes in the 
Inland Empire is currently in default and has started the foreclosure 
process.
  By no means am I advocating that we get rid of subprime lending. 
Subprime lending has empowered a number of borrowers to get into their 
first home, including roughly 85% of Latino families. So we can't let 
perfection be the enemy of the good.
  But we need better safeguards to protect subprime borrowers so they 
are not taken advantage of and receive loans they can afford, even 
after the teaser rates go up. We also need to put an end to abusive 
practices and overly relaxed lending standards. Lenders and brokers 
must price borrowers into homes according to the final, fully indexed 
rate and fully amortized repayment schedule; not just the teaser rate. 
And they need to explain the terms of these loans in plain English so 
that borrowers understand how much they are paying each month even 
after the rates adjust. Lenders should also explain the risks involved 
with payment shock and prepayment penalties. It's time we put 
unscrupulous lenders who are steering minority families into unsuitable 
loans out of business.

  Over the past 10 years, minority homeownership rates have improved, 
and in some cases for Hispanics, the homeownership has grown at a rate 
three times higher than that of other nonHispanic groups. The growth of 
the supbrime lending has contributed greatly to this achievement.
  But no one gains when people are thrown out of their homes. The 
housing market falls and entire neighborhoods are affected. This in 
turn impacts local economies and will ultimately impact our national 
housing market.
  We all know that homeownership is the key to the American dream and 
the means to household wealth and savings. Let's work to protect these 
hard-working families who are facing foreclosures and keep them in 
their homes.

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