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Eakes to Testify at Congressional Hearing

Monday, May 23, 2005

Congress holds hearings Tuesday, May 24th on two predatory mortgage-lending bills, one backed by industry that would gut strong state laws and weaken federal law, the other supported by consumer and civil rights groups and that would protect more people from losing their homes.

Martin Eakes, an expert on predatory lending as CEO of the nonprofit, nonpartisan Center for Responsible Lending and the Self-Help Credit Union in Durham, N.C, will testify before the House Subcommittees on Housing and Community Opportunity and Financial Institutions and Consumer Credit Tuesday, May 24th at 10 am.

Each year predatory mortgage lending costs American families more than $9 billion. Predatory lending disproportionately impacts vulnerable people, such as minorities and the elderly with less-than-perfect credit records and all too often causes borrowers to lose the hard-won equity in their homes. In the subprime market, where predatory lending is concentrated, one in five loans ends in foreclosure, 10 times the rate for prime mortgages.

Today the subprime market is exploding, as subprime mortgage volume rose from $35 billion to $504 billion between 1994 and 2004, with a corresponding boom in predatory lending. During the next five years, approximately 15 million homebuyers and homeowners will receive loans in this market. Eakes' and others testimony will help the subcommittees determine whether subprime mortgage loans will help American families improve their economic status or whether the abuses will continue and these families be pushed farther behind.

The subcommittees will consider the consumer-supported bill, HR 1182, co-sponsored by Reps. Brad Miller and Melvin L. Watt of North Carolina and Barney Frank of Massachusetts and HR 1295, co-sponsored by Reps. Robert Ney of Ohio and Paul Kanjorski of Pennsylvania.

The Miller-Watt-Frank bill, a leap forward for borrowers, is modeled on a North Carolina law that has ended many harmful practices such as flipping, when a lender keeps refinancing a home solely to charge more fees each time, and prepayment penalties that trap borrowers in expensive loans. The proposed legislation would ban mandatory arbitration clauses so that wronged borrowers have legal recourse.

The North Carolina law has afforded people in the state these protections without curtailing people's ability to borrow affordable loans. The Ney-Kanjorski bill, on the other hand, rolls back the basic federal protections -- 1994's Home Ownership and Equity Protection Act (HOEPA) -- and guts strong state laws like North Carolina's. It contains loopholes that would exclude many typical predatory loans from protections.

The North Carolina law has successfully performed as intended by the state's General Assembly since 1999. Self-Help participated with a broad coalition including the real estate and lending industry, civil rights and consumer groups to pass the NC bill.

NAACP Chairman Julian Bond has urged lawmakers to pass Miller-Watt-Frank and said, "I call on all our allies in Congress to reject the Ney-Kanjorski bill and work with other members of Congress who are providing real solutions to the crime of predatory lending."

Contact: Sharon Reuss at 919-313-8527 or Michael Flagg at 202-349-1862.