The Best Value in the Subprime Market: State Predatory Lending Reforms


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Published: February 23, 2006

To find a model for national legislation, many lawmakers need look no further than their own backyards. People who live in states with strong laws against predatory lending are more likely to get responsible mortgages at a lower cost.

Our findings show that state laws enacted to prevent predatory mortgage lending work as intended to reduce abusive loan terms without impeding credit. Strong state laws have been good for consumers while supporting a thriving subprime lending market. They provide credit-strapped families with plenty of access to responsible home loans at typical -- or even lower -- costs. At least 24 states have passed specific anti-predatory lending laws to supplement federal protections aimed at ending abusive mortgage lending practices.

Download the Report: The Best Value in the Subprime Market: State Predatory Lending Reforms (PDF 432kb)

 Report Toolkit: Download our report and all supporting info in a single file (PDF, 846kb)

Key Findings

The study shows that state anti-predatory lending laws work as intended to reduce abusive loan terms without impeding credit. In fact, there is evidence that many consumers get stronger protections AND lower costs. In states with laws that go beyond current federal protections, the study found:

  • Borrowers have abundant accessto responsible subprime credit.
  • Borrowers pay about the same or lessfor subprime mortgages as borrowers in states without such laws.
  • Borrowers get loans with fewer abusive terms.

From a homeowners' perspective, it appears that state laws may be the best deal in the real estate market. And complying with state laws only costs lenders about one dollar per loan (read our 2005 study on compliance costs, pdf).

Supplemental Maps and Data

>> Map 1: States with predatory mortgage lending protections in effect as of December 2004

Maps 2-5: States with predatory mortgage lending protections compared to states with minimal or no protections
>> Map 2: Difference in proportion of loans with terms targeted for reform (pdf)
>> Map 3: Change in overall subprime volume (pdf)
>> Map 4: Difference in Interest Rates on 30-Year Fixed Rate Mortgages without Prepayment Penalties (pdf)
>> Map 5 : Difference in Interest Rates on 30-Year Adjustable Rate Mortgages without Prepayment Penalties (pdf)