The fear of overwhelming credit card debt is driving many Americans to hand their equity back to mortgage lenders in the form of "cash-out" refinances. Rather than generating cash to invest in the family's future or cover short term emergencies, cash-out refinances frequently serve as equity-draining transactions that only repay ("consolidate") short-term debts, such as credit card balances. Worse, the...
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The rapid rise in debt among American households over the last decade is well documented, but it is not well understood. Prior to the survey findings presented in this paper, there have been no data available to study how many American households are using credit cards and how they are managing their debt. To answer these questions, Demos, along with...
The Center for Responsible Lending has released an analysis of payday lending industry data, which estimates that: Active-duty military personnel are 3 times more likely than civilians to have taken out a payday loan One in five active-duty military personnel were payday borrowers last year. Predatory payday lending costs military families over $80 million in abusive fees every year. The...
On September 29, the House Committee on Financial Services will hold a hearing focused on mortgage brokers ("Licensing and Registration in the Mortgage Industry"). The Ney-Kanjorski bill (H.R. 1295) -- Title V -- attempts to address mortgage broker abuses by requiring states to pass uniform broker licensing requirements. Title V ignores the most serious and common abuses by mortgage brokers...
On September 13, 2005, the Federal Reserve released Home Mortgage Disclosure Act statistics on mortgage lending showing once again that African-Americans and Latinos pay more for home loans than comparable white borrowers. Lenders claim that weaker credit records explain the disparities, but the industry opposed collecting any information in the HMDA data that would shed light on borrowers' creditworthiness. Only...
For the first time in 2004, lenders were required to report information to the federal government concerning the annual percentage rate (APR) charged borrowers on higher-cost home loans. The same data, collected under the requirements of the Home Mortgage Disclosure Act (HMDA), also detail several aspects of the loan transaction and the identity of the borrower, including race, ethnicity, sex...
The cost of compliance is a small percentage of mortgage lending expenses. We estimate that the use of automated systems lowers predatory lending law compliance costs to about one dollar per loan. Strong compliance also may reduce lenders' expenses by lowering the incidence of time-consuming and expensive foreclosures. Most important, the cost of complying with state laws is dwarfed by...
On September 15th, 2004, the National Home Equity Mortgage Association (NHEMA) released a report by Professors Richard DeMong and Richard Netemeyer of the University of Virginia that asserts that New Jersey's Homeownership Protection Act of 2002 has decreased access to credit for non-prime borrowers in the state. The authors assert that non-prime lending was lower and comprised a smaller share...
Committe: Congressional Black Caucus
This report quantifies the fees that people with checking accounts are now paying for high-cost, short-term overdraft loans. Many people are finding themselves with overdraft loans they never asked for, do not want, and cannot afford. Federal regulators have failed to protect these customers. The Center for Responsible Lending finds that borrowers are paying more than $10 billion per year...
Committe: House Subcommittees on Financial Institutions and Consumer Credit; Housing and Community Opportunity
Committe: Federal Deposit Insurance Corporation
Executive Summary Like payday loans, car title loans are marketed as small emergency loans, but in reality these loans trap borrowers in a cycle of debt. Car title loans put at high risk an asset that is essential to the well-being of working families -- their vehicle. A typical car title loan has a triple-digit annual interest rate, requires repayment...
Committee: Senate Committee on Banking, Housing, and Urban Affairs
Committe: House Subcommittee on Rural Enterprise, Agriculture and Technology, Kansas City, MO
While the payday lending industry frequently describes its typical customer in detail, discussion of race is noticeably absent. This report corrects that omission. Our analysis of North Carolina neighborhoods reveals a powerful relationship between the proportion of African-Americans in a neighborhood and the prevalence of payday lending stores. African-American neighborhoods have historically been disadvantaged by unfair lending practices. This study...
On March 1, 2005, the FDIC announced revisions to its guidelines to banks engaged in payday lending. The guidelines seek to "ensure that this high-cost, short-term credit product is not provided repeatedly to customers with longer-term credit needs." Thus, the FDIC has taken the important step of recognizing that payday lending can lead to a debt-trap. The guidelines call on...
While we are heartened that the OCC has recognized many of the issues raised by state anti-predatory lending efforts in recent years, the OCC's guidance for national banks is no substitute for meaningful and effective legislative efforts at the state and federal level. Further, we are disappointed that the OCC does not identify some practices as clearly predatory and take...
Prepayment Penalties Impact Minority Neighborhoods Click here to visit our tutorial, which walks you through a Truth in Lending disclosure form, and educate yourself. For years, subprime lenders have defended prepayment penalties by claiming that borrowers with penalties get a lower interest rate. Now, groundbreaking research by CRL shows that borrowers get no rate benefits with subprime prepayment penalties --...