CRL in the News

The proposal “would hurt rural and working families across the country,” said Michael Calhoun, president of the Center for Responsible Lending. He said Stegman’s proposal in effect abandons the affordable housing goals and waters down the companies’ duty to serve all markets. One problem not addressed in Stegman’s plan, Calhoun said, is how to prevent new housing-finance models from charging more to less-well-off borrowers than to rich borrowers.

With that one line, Republican lawmakers have declared their willingness to allow people facing financial difficulties to be at the mercy of predatory lending practices that typically involve annual interest rates approaching 400%. "They’re trying to sneak in that provision,” Diane Standaert, executive vice president of the Center for Responsible Lending, told me. “It seems like they hoped no one would notice.”

If you decide to trade in your car, be aware that this doesn’t eliminate negative equity — it rolls it into the monthly payment on your new loan. This means you could end up taking on even more debt. “What’s more likely is you’re going to end up just constantly rolling over negative equity,” says Chris Kukla, executive vice president of the Center for Responsible Lending.

The financial services industry has responded by creating STSDC products that provide quick and easy liquidity injections for cash-strapped borrowers. These products have become a de facto liquidity support system for families dealing with the consequences of income disparity and volatility. While STSDC products satisfy urgent short-term needs, they carry a high price. The severe negative individual, social and economic impacts of this type of high-cost liquidity support have been very well-documented over the years by the Pew Charitable Trusts, the Center for Financial Services Innovation

For analysts focused on financial inclusion, the SoFi Wealth product may be a step in the right direction, but a long way from giving underserved populations a needed leg up. "Even $500 is hard for low-income customers, these people are borrowing $200 to make ends meet — but it’s better than a $10,000 [minimum]” said Ashley Harrington, counsel at the Center for Responsible Lending. What’s more likely, Harrington added, is that the availability of the product could benefit borrowers of color who have access to more capital.

Our primary concerns are ensuring that the system provides for access and affordability for all creditworthy borrowers. Right now creditworthy borrowers are being locked out of the system and being underserved. When we look at recent HMDA [Home Mortgage Disclosure Act] data — specifically the 2015 data — we are concerned to see low levels of conventional lending to borrowers of color and to lower-wealth families overall. We think that conventional lenders have responded to the mortgage market with market overcorrections that are pushing creditworthy borrowers outside of their ability to access

In the late 1990s, leaders at Self-Help Credit Union began to notice a disturbing trend. While Self-Help was helping lower-wealth families buy their first homes, predatory lenders were busy targeting the same families for subprime refinances. Too often these refinances drained the homeowners’ resources until they lost their homes. When a borrower came to us owing more than $47,000 on a house that originally cost $29,000, we knew we had to act.

Ezekiel Gorrocino, a policy associate for the Center for Responsible Lending, a North Carolina-based nonprofit that fights predatory lending practices, described the legislation as a “prepackaged” bill that payday lending companies have pushed over the past few years across the country.

“This extreme legislation would put the foxes back in charge of guarding the hen house by putting big banks and predatory lenders back in charge of our economy,” Yana Miles, senior legislative counsel for CRL, said in a statement.

Under the qualified mortgage rules, banks are largely banned from offering certain "harmful loan features," such as an “interest-only” period, loan principals that increase over time, balloon payments that come due at the end of a loan term and loan terms longer than 30 years. Such loans are safer for the financial industry and perform better for banks, says Sarah Wolff, senior researcher at Center for Responsible Lending.