A coalition of California groups plans to testify during a Federal Reserve Board of Governors meeting this week about the dangers of predatory mortgage lending, according to an announcement.
Among the existing problems in the industry, cited by the coalition: many borrowers are sold loans based on a stated income, with no documentation to show the borrowers are able to afford the loan; borrowers are sold loans with low initial rates that will drastically increase in the coming years and could leave unsuspecting borrowers unable to pay their mortgages; loans are sold to non-English speakers who don’t understand the documents they sign for the loan; borrowers of color are much more likely to get stuck with overpriced loans; and seniors are in some cases targeted for equity-stripping scams.
To combat predatory lending practices, members of the California Reinvestment Coalition will urge the Federal Reserve Board to:
- Include more overpriced loans within the protections of the Home Ownership and Equity Protection Act (HOEPA), the federal anti-predatory-lending law.
- Restrict Yield Spread Premiums (fees lenders pay brokers for charging consumers more for their mortgages) and Pre-payment Penalty Provisions that charge borrowers thousands of dollars for refinancing out of bad loans.
- Protect consumers from lenders and brokers who take advantage of borrowers not fluent in English.
- Expand Home Mortgage Disclosure Act reporting requirements so more information is available to better detect areas of discrimination.
- Require housing counseling before closing.
The California Reinvestment Coalition and its members have been invited to testify on panels at the hearing, which will take place at the Federal Reserve Bank of San Francisco at 101 Market St., according to a coalition announcement.
“Stronger federal protections for consumers are needed to address an explosion of ‘nontraditional’ loan products in the mortgage lending market,” stated Heidi Li, co-founder of Housing and Economic Rights Advocates in Oakland, a group that is a part of the coalition. “Legal and consumer advocates, along with housing counseling agencies, find these products are often aggressively and deceptively pushed by brokers and lenders onto unsuspecting consumers.”
Kevin Stein, associate director of the California Reinvestment Coalition, said in a statement, “The mortgage market is broken, and we need the Federal Reserve to clamp down on predatory lending that unfairly targets people of color, the poor, seniors, immigrants and their neighborhoods.”
The coalition has received endorsements from a number of groups, including: Affordable Housing Services, Pasadena; Asset Policy Initiative of California, San Francisco; California Coalition for Rural Housing, Sacramento; Bet Tzedek Legal Services, Los Angeles; California Community Economic Development Association, Los Angeles; Center for Responsible Lending, Oakland; City of Oakland Civic Center Barrio Housing Corp., Santa Ana; Community Housing Development Corp. of North Richmond; Community Housing Opportunities Corp., Davis; Consortium for Fair Lending, San Francisco; Consumer Action, San Francisco; Consumer Credit Counseling of SF, San Francisco; Consumers Union, San Francisco; East Bay Asian Local Development Corp., Oakland; Lenders for Community Development, San Jose; Los Angeles Neighborhood Housing Services, Los Angeles; and others.
The coalition has a membership of about 240 nonprofits and public agencies in California.
The Federal Reserve Board hearing will take place from 8:30 a.m. to 4 p.m. Friday. Members of the public can speak in an open microphone session at 3 p.m. The Federal Reserve will accept written comments until Aug. 15.
