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Minority Families Pay More: HMDA Stats Show Disturbing Disparities

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 lenders have access to the information that would prove their point – and they're not sharing it. Research Shows People of Color Pay More to Brokers Research by Professor Howell...

Comment on Federal Reserve Analysis of Home Mortgage Disclosure Act Data

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, and income. In this review, we both summarize and comment on a portion of the first report based on the new data that was written by Federal Reserve Board of Governors' researchers. In general, the...

Strong Compliance Systems Support Profitable Lending While Reducing Predatory Practices

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 the millions of dollars in homeowner equity that is saved each year by these laws.

Response to NHEMA's "Analysis of 1st Quarter 2004 Mortgage Lending in New Jersey and Pennsylvania"

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 of the total mortgage market in New Jersey than in Pennsylvania. In addition, the authors claim that borrowers in New Jersey had, on average, higher incomes and FICO scores than Pennsylvania borrowers...

High-Cost and Hidden from View: The $10 Billion Overdraft Loan Market

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 for fee-based overdraft loans.

Car Title Lending: Driving Borrowers to Financial Ruin

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 within one month, and is made for much less than the value of the car. Title loans are typically made without regard to borrowers' ability to repay. Because the loans are structured to be repaid as a single balloon payment after a very short...

Race Matters: The Concentration of Payday Lenders in African-American Neighborhoods in North Carolina

Payday Lenders Set Up Shop in African-American Neighborhoods Neighborhoods with many African-American families house more than their share of predatory payday loan shops. View maps that show where payday shops are located relative to minorities in your part of the state. 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...

Race Matters: The Concentration of Payday Lenders in African-American Neighborhoods in North Carolina

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 shows a continuing problem. Predatory lending in protected communities may constitute discrimination -- not because it excludes minorities, but...

FDIC's Revised Examination Guidance on Payday Lending

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 banks to develop procedures to ensure that they do not make payday loans to customers who have had payday loans outstanding from any lender for a total of more than three months in the previous 12 months. Assuming a...

Analysis of OCC Guidelines Establishing Standards for Residential Mortgage Lending Practices

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 a stronger stance on enforcing rules that prohibit banks from engaging in predatory lending. The Guidelines demonstrate recognition of some predatory lending issues, but are insufficient to protect homeowners from abusive...

Prepayment Penalties Convey No Interest Rate Benefits on Subprime Mortgages

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 -- and that residents in minority neighborhoods have much greater odds of receiving such penalties. Prepayment penalties (fees for paying off mortgage loans early) are almost nonexistent...

Borrowers in Higher Minority Areas More Likely to Receive Prepayment Penalties on Subprime Loans

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 -- and that residents in minority neighborhoods have much greater odds of receiving such penalties. Prepayment penalties (fees for paying off mortgage loans early) are almost nonexistent...

Access Denied: Payday Loans are Defective Products

PAYDAY LENDERS OFFER DEFECTIVE PRODUCT, CLAIMING IT FILLS NEED FOR ACCESS TO CREDIT Predatory payday loans: trap borrowers in high-cost debt drain income and damage credit could be offered on HBCU campuses under new agreements Defenders of the payday lending industry use the term "access to credit" to make the argument that payday loans provide communities of color with financial services that have historically been denied them. But payday lending is a faulty form of credit and a poor substitute for fair and responsible financial services. Rather than help borrowers through financial...

Refund Loan Products and VITA: A Summary of Issues and Options

In August, 2004, a group of people representing free tax preparation programs, national organizations and consumer advocacy groups met in Baltimore to discuss Refund Anticipation Loans (RALs). The meeting was hosted by the Annie E. Casey Foundation, a major funder of Earned Income Tax Credit (EITC) outreach and free tax preparation for low-income working families. While the group represented a diversity of views, the overall sense of the attendees was that, attracted by the prospect of large tax refunds – mainly due to eligibility for the EITC -- tax preparers and financial institutions take...

Building a Better Refund Anticipation Loan: Options for VITA Sites

Refund Anticipation Loans, or RALs, are an extremely popular means for taxpayers to access their refunds more quickly than waiting for a paper check or even direct deposit. The negative effects of these loans—including their cost and lack of consumer protections—are well documented. Many consumer advocates and community development professionals are rightfully concerned about the popularity of these products, but also recognize that they can be useful to some filers. Fortunately, free tax preparation sites across the country are working to design and deliver RALs that promote the long-term...

Auto Title Loans and the Law

This brochure was developed and published by the South Carolina Appleseed Legal Justice Center. What is an Auto Title Loan? An Auto Title Loan is a short-term loan, usually no longer than 30 days. Your car title is used to secure the loan. This means if the loan is not repaid, the lender may take the car and sell it to get the loan money back. Most title lenders will only make the loan if you do not owe anything else on the car. Who are Auto Title Lenders? Auto Title Lenders often target people with bad credit, low-income individuals, military members, and elderly people. The lenders make...
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