Coalition Calls for Predatory Lending Legislation to Protect Minority Homebuyers
Feature Story by Tyler Lewis - 4/25/2006
An elderly homeowner, sick in the hospital, signs for a consolidation loan to pay her mounting medical bills. Too late, she discovers she's fallen victim to a lender who preys on minorities, women and the elderly desperate to find a way out of rising debt. She loses her home.According to experts, homeowners lose an estimated $9.1 billion each year as a result of predatory mortgage lending practices.
Because of the rise in such lending practices, civil rights organizations have called on Congress to enact legislation to provide stronger protection for underserved populations when they apply for mortgage loans.
In a letter sent to the House Committee on Financial Services on April 24 by the Leadership Conference on Civil Rights and 43 other organizations, including the National Fair Housing Alliance and the National Council of La Raza, the groups urged Congress to enact legislation that will "address the needs of our communities."
Acknowledging that homeownership is the predominant avenue for accumulating wealth, the letter states that predatory lending "threatens decades of work by the civil rights community to increase minority homeownership."
Many minorities, immigrants, women, and elderly tend to have less experience with the mortgage market and are therefore more vulnerable to exploitation. For this reason, such legislation would improve protections for families looking to buy homes, ensure access to courts for victims, and guarantee access to fairly-priced credit.
Predatory lending practices usually take the form of refinanced loans with excessive fees, but can also include penalties for paying off loans early; kickbacks to brokers; loan flipping; steering borrowers into unnecessary subprime loans; and targeting vulnerable borrowers, particularly African Americans.
Most of these predatory lenders target people with bad or limited credit. Minorities, immigrants, women, elderly, and individuals who live in poverty are disproportionately represented in this population.
In the last 10 years, the subprime market has grown 1000 percent, according to the Center for Responsible Lending (CRL). CRL estimates that subprime lending increased 50 percent between 2002 and 2003 alone.
Some housing experts point out that subprime lending is essential to providing homeownership opportunities to those least likely to have them. But there is too often a downside. Wade Henderson, executive director of the Leadership Conference on Civil Rights, said, "While increased access to credit for families with impaired credit histories is to be applauded, the prevalence of subprime loans with abusive characteristics has been devastating to minority and disadvantaged communities."
