Support the Prohibit Predatory Lending Act
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Support the Prohibit Predatory Lending Act
Reps. Miller, Watt and Frank have introduced a bill that would tighten existing loopholes and provide stronger protections for homeowners who are vulnerable to predatory lenders. Their bill also would preserve state laws that are already working. For more information, click here to download our analysis. (PDF)
Dear [ Decision Maker ] , I am writing to ask you to support H.R. 1182, "The Prohibit Predatory Lending Act." This law will preserve the benefits of homeownership for everyone, particularly those who depend most on their home to build wealth. Current federal law allows predatory lending practices that strip billions of dollars of assets from working families, the elderly and minority groups. An effective law, such as H.R. 1182, will strengthen protections for homeowners, close loopholes to cover more loans and abusive practices, and preserve the ability of states to address predatory lending issues at the local level. Congressmen Brad Miller, Melvin Watt and Barney Frank introduced H.R. 1182 based on anti-predatory lending legislation already effective in several states, including North Carolina, the home of many of the nation's largest banks. Predatory lending has decreased dramatically in North Carolina while subprime lending continues to flourish. One study estimates that North Carolina citizens saved $100 million during the first year alone. Today unscrupulous lenders can strip equity by inserting exorbitant fees into the mortgage loan. They can repeatedly refinance the same mortgage until the borrower's equity is gone. They can prevent victims of predatory lending from protecting their homes against foreclosure after lenders have sold their loan. Given these practices, it is not surprising that one in five subprime mortgages goes into foreclosure. H.R. 1182 would correct the above issues in a comprehensive way. By contrast, a bill introduced by Reps. Ney and Kanjorski (H.R. 1295) would be harmful to homeowners. Rather than encouraging responsible lending practices, this bill would allow abusive practices to continue. Moreover, it would provide no meaningful way to enforce the weak protections offered, and it would override successful state laws. This is a time when foreclosures are rising in many areas. Families are struggling with debt, and abusive lending practices are harming some of our most vulnerable citizens. Please help protect the financial future of working families by supporting the Miller-Watt-Frank bill, H.R. 1182.
Sincerely, |
Campaign Launched: |
| Background Information |
H.R. 1182 provides stronger protections against predatory lending in the subprime mortgage market, which targets families who struggle with debt. The bill is based on a 1999 North Carolina law that has achieved excellent results in reducing predatory lending while allowing plenty of mortgage credit for working families. H.R. 1182:
- improves upon existing protections for high-cost loans
- tightens existing loopholes in federal law
- provides for enforcement, and
- allows states to supplement the law if necessary to address local issues.
Predatory lending, a term used to describe an abusive set of home lending practices that deprive homeowners of hard-earned equity, has been estimated to cost U.S. consumers $9.1 billion each year. Over the last decade, predatory lending emerged in the subprime home loan market primarily among finance companies and mortgage brokers (both of whom lack safety and soundness regulators). Subprime lending generally describes loans made to individuals that do not meet the criteria for mainstream (also called "prime") loans. It is important to note that while all subprime loans are not predatory, almost all predatory loans are subprime.
While many abusive practices have emerged in this sector, the single largest abuse is equity-stripping. Not satisfied with higher interest rates, abusive lenders strip equity by charging exorbitant fees, often equal to 5% or more of the loan amount (five times the typical fee on a competitive, prime loan). The problem for borrowers is that while they may refinance out from an interest rate that does not properly reflect their risk, they cannot recover fees. Instead, in almost every instance those fees are financed into the loan amount and are repaid from the borrower's equity when they refinance.
For more information, click here to download our analysis of HR 1182. (PDF)
