Research & Policy

>>Take Action: Ask your Senators to support S2452 In brief, the Homeownership Preservation and Protection Act sponsored by Senator Christopher Dodd and other leaders in the Senate will achieve these key goals: Establish new protections for all consumers. It will stop brokers from steering prime borrowers into more expensive subprime loans, create a duty for mortgage brokers to consider the best interests of their clients, and provide for a duty of good faith and fair dealing toward borrowers for all lenders. Establish new protections for families who get subprime loans or non-traditional...

Read the Executive Summary 36% Cap Springs the Trap Measures short of an interest rate cap fail to fix payday lending problem The debt trap of payday lending persists even in states that have put restrictions on payday loans while exempting them from interest rate caps. In "Springing the Debt Trap," CRL finds that high numbers of borrowers are still caught in payday loans for long periods of time, even in states that have passed certain measures intended to stop this cycle. No measure short of an interest rate cap has effectively addressed the repeat borrowing that advocates, policymakers, and...

Payday loans carry an annual interest rate of 391 percent and are so difficult to pay off that many borrowers end up paying more in interest than they originally borrowed, as documented in our report entitled, Financial Quicksand. Payday lenders renew their loans to the same borrowers many times per year, either by rolling them over for another term, or closing them out and re-opening them. Our report, Springing the Debt Trap, finds that only a two-digit interest rate cap has successfully addressed this loan flipping in the states.

A working paper by a staffer at the Fed Bank of NY is fundamentally flawed, offers no valid information, and is being used to justify policy that keeps low-wealth borrowers trapped in income-draining payday loans. The paper is not a Federal Reserve Bank report as a payday industry press release implies. Our critique exposes the fatal errors in the paper's methodology.

Committee: House Committee on Financial Services

Committee: U.S. Senate Judiciary Committee

In our December 2006 study, " Losing Ground," CRL predicted that millions of American households would lose their homes to foreclosures in the subprime mortgage market. "Losing Ground" focused on the direct impact of subprime foreclosures, but it did not attempt to quantify how those foreclosures would affect neighboring homes and larger communities. In other words, it did not address the "spillover" effect where foreclosures themselves would further depress local housing prices. In this report, we estimate how many homes—including families who are paying their mortgage on time—will suffer a...

The North Carolina Commissioner of Banks found that low- and middle-income families in North Carolina have not been negatively impacted by the absence of payday loan shops that once dotted the state's street corners and strips malls; in fact, many are not aware that they have left. Nine of ten survey respondents think payday lending is a "bad thing," and at a two-to-one ratio, former borrowers report that they are better off now that it's gone.

Recent industry projections are that over eight million families will lose their homes to foreclosure over the next four years. That's one in every six homeowners with a mortgage. If the economy enters a deep recession, the number of homes lost could exceed 10 million. With the housing sector responsible for one in eight U.S. jobs, the flood of new foreclosures will contribute to the growing unemployment rates and further constrict consumer spending. Banks are foreclosing on homes at a rate of approximately 40,000 per week. The failure to stem these losses imposes a cost to the taxpayers every...

Committee: U.S. House Judiciary Committee Subcommittee on Commercial and Administrative Law

Congressman Miller, Congressman Watt, and Chairman Frank introduced the "Mortgage Reform and Anti-Predatory Lending Act of 2007" on October 22, 2007. The proposed legislation addresses many abusive lending practices that contributed to today's foreclosure crisis, including reckless underwriting practices, subprime prepayment penalties, and yield-spread premiums. However, it is critical that the details of remedy and enforcement provisions are strengthened in order to ensure protections are meaningful and that industry participants, including the secondary market, take their responsibility to...

Committee: U.S. House Committee on Financial Services