Congressman Cummings Leads Colleagues in Speaking Out Against Predatory Lending Practices in the Subprime Mortgage Industry

Press Release

Congressman Cummings Leads Colleagues in Speaking Out Against Predatory Lending Practices in the Subprime Mortgage Industry

Today, U.S. Congressman Elijah E. Cummings, a Member of the Joint Economic Committee and the Baltimore Home Ownership Preservation Coalition led his colleagues in speaking out against predatory lending practices in the subprime mortgage industry. Additionally, he introduced a resolution expressing the sense of Congress that issues related to the subprime market must be addressed. Specifically, the legislation identifies the following goals for reform:

* Strengthening federal regulations on predatory lending in the subprime mortgage industry;
* Banning unfair and deceptive practices;
* Requiring lenders to establish a borrower's ability to pay;
* Increasing disclosure of alternative mortgage products;
* Reducing or eliminating the prepayment penalty;
* Identifying brokers and lenders with high rates of foreclosure; and
* Mandating pre-loan counseling

"Owning a home is an essential component of the American Dream. Simply put, homeownership has the power to transform lives," Congressman Cummings said. "I still remember the day, 45 years ago, when my family first moved into our own home. I was only 10-years-old, but I will never forget that momentous event. Homeownership changed life for me and my six brothers and sisters. We were able to go to better schools, and our family was able to build wealth. And like my family, every American family deserves the benefits of homeownership that transformed my own family."

However, based on recent reports, predatory lending practices in the subprime mortgage industry has caused a surge in the number of foreclosures.

"I am concerned that this American Dream may be in jeopardy for millions of Americans," Congressman Cummings said.

According to RealtyTrac, a real estate research firm, foreclosures increased by 42 percent from 2005 to 2006, to 1.2 million. That translates into one foreclosure for every 92 households.

In addition, the subprime mortgage industry has grown from less than 8 percent of the total mortgage market in 2001, to approximately 20 percent of the market today. Subprime mortgages, which target borrowers with low credit scores, often cost more than prime mortgages and include terms that allow payments to "balloon," or grow exponentially over time. Further, predatory lending practices are common in the subprime mortgage industry, where borrowers are more likely to either have limited options available to them or to be unaware of their options.

"Much has been made of the impact that these foreclosures will have on Wall Street; however, I am equally concerned with the impact they will have on the hundreds of thousands of Americans who are losing their homes," Congressman Cummings said.

Disturbingly, African-Americans and Latinos are more likely to get higher-rate subprime loans than white borrowers with the same qualifications, and borrowers over the age of 65 have five times the odds of receiving a subprime loan than younger borrowers. This trend is prevalent in Congressman Cummings' district which includes Baltimore City, Baltimore County and Howard County.

"It is simply unconscionable that some dishonest individuals and companies are profiting from vulnerable families who are losing their homes," Congressman Cummings said. "For those of us who remember redlining, this is simply more of the same. We must end discriminatory lending practices now."

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