[Congressional Record (Bound Edition), Volume 147 (2001), Part 20]
[Extensions of Remarks]
[Pages 28011-28012]
[From the U.S. Government Publishing Office, www.gpo.gov]



    PROTECTING OUR COMMUNITIES FROM PREDATORY LENDING PRACTICES ACT

                                 ______
                                 

                           HON. MAXINE WATERS

                             of california

                    in the house of representatives

                      Thursday, December 20, 2001

  Ms. WATERS. Mr. Speaker, today I rise to introduce the ``Protecting 
Our Communities From Predatory Lending Act,'' much needed legislation 
to prevent predatory lending. This year, my home state of California 
became the third state in the nation to pass a law regulating predatory 
lending practices. Reverse redlining or predatory lending encompasses a 
number of lending practices that target minority communities, employing 
interest rates and service fee charges that are significantly higher 
than those prevailing in white communities. Such predatory lending 
practices are prevalent in many areas across the country and federal 
action in this area is long overdue.
  Home equity loans have historically been the privilege of the middle 
class and wealthy, who generally have high credit ratings, income, and 
home equity. However, beginning in the 1980s, non-depository finance 
companies--lending institutions other than commercial banks, thrifts, 
and credit unions--began to provide home-equity loans to lower-income 
communities, which were not served by mainstream lenders.
  Persons in low-income communities typically have little disposable 
income, but may have substantial home equity as a result of paying down 
their mortgages or through the appreciation of their property values. 
This equity can secure sizable loans. While offering loans to low-
income and minority communities can benefit these communities, 
predatory lending practices, which oftentimes use the borrowers' home 
as collateral, have milked the last drops of wealth from many of these 
neighborhoods, leading to increased poverty and public dependence.
  My bill adds important protections to the law that will save many 
people from losing their homes. My legislation would prohibit the 
industry from making false, deceptive or misleading statements or 
engaging in unfair or deceptive acts or practices, and prohibit blank 
terms in credit agreements that are filled in after the consumer has 
signed. In addition, it would prohibit prepayment penalties and the 
financing of credit insurance.
  My bill will prohibit the ``flipping'' of consumer loans, in which 
the borrower refinances an existing loan when the new loan does not 
have a reasonable, tangible benefit to the consumer. This practice of 
flipping often costs the consumer thousands of dollars in fees and 
frequently leads to foreclosure. My bill will eliminate the practice of 
charging fees for services or products not actually provided. It will 
also prevent collusion between lenders and appraisers or home 
improvement contractors by prohibiting direct payments to home 
improvement contractors without a consumer cosignature and prohibits 
creditors from influencing the judgement of an appraiser.
  My legislation will remove the shroud of secrecy that currently 
surrounds the application process by requiring that a consumer receive

[[Page 28012]]

disclosure of his or her credit score and an explanation of the 
methodology used to calculate the credit score, if one is used by the 
lender.
  My legislation will impose restrictions on late payments and apply 
additional safeguards by lowering the threshold for high cost 
mortgages.
  Finally, my legislation will prohibit steering consumers into loans 
with higher risk grades than the consumer would qualify for under 
prudent underwriting standards. This is merely the latest in a long 
line of practices that have targeted minorities and low and moderate 
income families, shutting them out of the American Dream of 
homeownership.
  This problem is getting worse, not better. According to an ACORN 
study, Separate and Unequal 2001: Predatory Lending in America, which 
was released last month, African-American homeowners who refinanced in 
the Los Angeles area were 2.5 times more likely to receive a subprime 
loan than white homeowners were and Latinos were 1.5 times more likely 
to receive a subprime refinance loan. And this is not merely a function 
of income: Upper-income African-Americans and middle-income African-
Americans were more likely to receive a subprime loan than low-income 
white homeowners when refinancing. Middle-income Latinos were also more 
likely to receive a subprime refinance loan than low-income whites.
  We must continue to scrutinize predatory lending practices and 
protect American consumers who are easy targets for the predatory 
lending industry. Congress and federal agencies must recommit our 
efforts to ensure that greater opportunity to credit access means an 
increase in quality of life, not an increase in predatory lending and 
foreclosure. I will continue fighting on the federal level until 
predatory lending is eliminated and the term will only have relevance 
in history books. I encourage my colleagues to support my legislation 
and look forward to working with you to eliminating this blight from 
our communities.

                          ____________________