Research & Policy

The Helping Families Save Their Homes in Bankruptcy Act of 2009 (S 61 and HR 200) The failure to stem the foreclosure crisis will cost the taxpayers hundreds of billions of dollars in lost tax revenues and economic decline. Recent industry projections are that over 8 million families will lose their home to foreclosure over the next four years. That's 1 in every 6 homeowners with a mortgage. If the economy enters deep recession, the number of homes lost could exceed 10 million. With the housing sector responsible for one in eight US jobs, the flood of new foreclosures will contribute to the...

How OTS allowed reckless and unfair lending to fleece homeowners and cripple the nation's savings and loan industry. Although the Office of Thrift Supervision was created as a result of the first savings & loan crisis, history repeated itself as the OTS ignored bad lending practices and allowed thrifts to self-destruct. OTS permitted WaMu, IndyMac and other thrifts to engage in increasingly risky lending practices that harmed borrowers, undermined the institutions' own financial health, and ran up enormous costs that have landed in the taxpayer's lap. OTS was slow to act as the financial...

Committee: U.S. House of Representatives Committee on Financial Services

In 2005, Alan Greenspan, then chairman of the Federal Reserve Bank, praised subprime mortgages as a positive innovation made possible by better risk assessment, and "representative of the market responses that have driven the financial services industry throughout the history of our country." Only two years later, there was growing concern that failing subprime loans, which had shot up to nearly a quarter of the total mortgage market originations, were driving our economy into recession. It is now clear these concerns were well-founded. The damage stemming from subprime foreclosures has grown...

The California Office of the Center for Responsible Lending prepared the following documents to help California's newest legislators navigate the predatory payday lending arena. SNAPSHOT: Payday Lending in California Predatory Profiling: The Role of Race and Ethnicity in the Location of Payday Lenders in California About Us CRL's California Office Visit the Self-Help Web site to learn about Self-Help's Impact on communities and individuals.

After years of industry-blocked efforts to strengthen lending standards, the growth in reckless lending and abusive practices has left California facing a foreclosure crisis with catastrophic consequences for families, communities, and the California economy as a whole. California needs policy reforms to stem the tide of foreclosures, and to tighten lending standards to prevent a repeat of this foreclosure crisis. Defaults And Foreclosures Have Increased Sharply Since 2006. Completed quarterly foreclosures increased from less than 3,500 in 3Q 2006, to nearly 80,000 foreclosures in 3Q 2008...

The California Office of the Center for Responsible Lending prepared the following documents to help California's newest legislators navigate the predatory mortgage lending arena. About Mortgage Lending SNAPSHOT: California Mortgage and Foreclosure Data January 2009 CA Foreclosures by Assembly and Senate District Read Paul Leonard's August 4 testimony on the state of the mortgage crisis in California, " The Mortgage Crisis Today: How Far Have We Come and Where Do We Need to Go?". Protecting Homeownership, Reforming the Marketplace: The California Legislature's Role in Today's Crisis About Us...

There are more than 2,400 payday lending stores in California in 2008, more than all Starbucks and McDonald's combined. California borrowers took out more than 10 million payday loans in 2006, totaling $2.5 billion. Payday fees strip $405 million from payday borrowers annually. Payday loans are small, short-term loans secured by the borrower's personal check. The typical two-week loan is costly, with lenders allowed to charge an annual percentage rate (APR) of up to 459 percent. Although marketed – and justified – as a short-term emergency advance on a borrower's paycheck, the data show that...

Download the executive summary (pdf) >> With roughly a trillion dollars in credit card debt, Americans have come to rely on their credit cards as both a form of payment for purchases and a flexible way to borrow cash. Credit cards are also a key source of income for financial institutions, with a rate of return that tends to be much higher than most other consumer loan products. While credit card companies compete to offer the lowest "headline" rates in solicitations, they also depend on less obvious tactics to boost their financial returns. Credit card issuers at one time charged a single...

Read the Executive Summary >> Americans have come to rely on their credit cards as both a form of payment for purchases and a flexible way to borrow cash. The total amount of credit card debt is approaching a trillion dollars. Credit cards are a key source of revenue for financial institutions and usually among the most profitable loan products available today. Credit card pricing has become highly complex and increasingly difficult for borrowers to follow. Credit card issuers at one time charged a single fixed interest rate to all customers and now charge individual customers several...

Jack Kemp, a former Republican secretary of Housing and Urban Development, in an LA Times editorial, said: "Bankruptcy law is wildly off-kilter in how it treats homeownership. Under current law, courts can lower unreasonably high interest rates on secured loans, reschedule secured loan payments to make them more affordable and adjust the secured portion of loans down to the fair market value of the underlying property -- all secured loans, that is, except those secured by the debtor's home. This gaping loophole threatens the most vulnerable with the loss of their most valuable assets -- their...

Presented by Kathleen Keest, Senior Policy Counsel-Center for Responsible Lending at the symposium "The Subprime Housing Crisis: Interdisciplinary Policy Perspectives" October 10-11, 2008 at The University of Iowa, Iowa City, IA In many respects, events have overtaken this conference. In 2006, CRL released a study that projected 2.2 million foreclosures of subprime mortgages. [1] But by this spring, Credit Suisse projected 6.5 million foreclosures over the next five years, as the housing crisis spread beyond the subprime sector into the larger mortgage market. [2] There is a downward spiral of...

Foreclosure Prevention Is Good Policy Excessive foreclosures of unsustainable loans are at the root of the financial crisis. Although devastating for homeowners, the impacts of foreclosures are much broader. Neighbors lose property value; municipalities lose tax revenues; and the economy loses needed purchasing power. Any solution to the current crisis, therefore, must address the problem of runaway foreclosures. While mass, streamlined modifications are the best solution, voluntary loan modification efforts have been woefully inadequate. Below, CRL offers state and local policy options for...

Committee: US Senate Committee on the Judiciary

Committee: U.S. Senate Committee on Banking, Housing and Urban Affairs

Summary of Bill Full Session Law This legislation creates a program within the Commissioner of Banks' office designed to reduce the number of subprime foreclosures in North Carolina. The law requires that homeowners receive at least 45 days' notice before foreclosure proceedings begin, and gives the Commissioner of Banks (COB) the authority to extend the foreclosure process an additional 30 days to facilitate efforts between servicers and borrower to save the borrower's home. In addition, the law provides that the Commissioner may use existing funds to hire staff and to create a database...

Don't Believe the Revisionist History Once upon a time, the lending industry was the loudest cheerleader in the subprime lending game, and there were no referees to stop the action. Now industry claims the government made them make millions of reckless mortgages. In fact, today's financial meltdown began with reckless subprime lending that was driven by Wall Street's desire for high-interest loans. Wall Street demanded the loosest underwriting and most dangerous loan products in mortgage history, and there was no will in Washington to stop them. To get the real facts, check out these sources...

Committee: US House of Representatives Committee on the Judiciary

Committee: Senate Committee on Banking, Housing and Urban Affairs

It's time to stop the scapegoating: According to a study by the Federal Reserve, 94% of high-cost loans originated during the housing boom had nothing to do with Community Reinvestment Act goals. Lending to poor didn't spur crisis -Fed's Kroszner The Comptroller of the Currency. John C. Dugan, agrees: "CRA [the Community Reinvestment Act] is not the culprit behind the subprime mortgage lending abuses, or the broader credit quality issues in the marketplace. Indeed, the lenders most prominently associated with subprime mortgage lending abuses and high rates of foreclosure are lenders not...

People of color have less wealth than their white counterparts, making them more vulnerable to predatory lending. This, in turn, threatens to further widen the wealth gap. Research from several states suggests that people of color are disproportionately impacted by 400 percent APR payday lending. An examination of payday lending storefront locations in Maricopa and Pima Counties—in which over three-quarters of Arizona payday lenders are located—reveals a pattern of these stores clustering in communities of color. A measure on Arizona's November ballot, Proposition 200, would allow payday...

Summary Full Session Law This legislation does two things. First, it made technical corrections to provisions enacted last year providing new protections for consumers in loan servicing. Second, the law banned subprime yield-spread premiums (YSPs). YSPs are compensation paid to a broker for increasing the interest rate on a loan or for getting the borrower to agree to accept unfavorable terms. YSPs provided the incentive for brokers to aggressively market the kinds of loans that created the problems in today's mortgage market. The technical changes to existing law include: Servicers must mail...