Predatory mortgage lending, as the name implies, is the practice whereby lenders take advantage of unsuspecting homeowners by marketing loans with high interest rates and fees. Predatory practices vary from community to community. Usually lenders or mortgage brokers: charge borrowers excessive, often hidden fees; successively refinance loans (i.e., flipping) at no benefit to the borrower; make loans without regard to a borrower's ability to repay; and engage in high-pressure sales tactics or outright fraud and deception. The population groups that appear especially targeted for these practices include the elderly and low-income individuals, African Americans and other minorities.
Predatory lending has received considerable attention in the news media, largely because of the efforts of local and national community and consumer organizations. In response, high profile enforcement actions were taken against some of the more notorious predators and several states have adopted new consumer protection measures. HUD and the Treasury Department issued a joint report calling for expanded federal action. Last year, the Federal Reserve Board expanded its existing regulatory authority to bring additional homeowners under existing consumer protections and to gather more and better data about these practices.
Cardinal McCarrick, in a May 2002 letter to Congress said, "Efforts to revitalize neighborhoods and to expand homeownership among low income families are being threatened by abusive lending practices. These practices termed, "predatory lending," trap far too many unsophisticated and vulnerable people"often the elderly"into high cost loans that frequently lead to foreclosure after stripping any equity from the home. The Catechism of the Catholic Church condemns this sort of speculation, this usury, as "morally illicit." (2409)
What You Can Do
Contact your Representative and Senators and urge them to support the provisions found in The Predatory Lending Consumer Protection Act of 2002 offered by Senator Sarbanes and Representative LaFalce in the last Congress. These provisions would tighten the definition of "high cost" mortgages and would give people who borrow under such conditions additional protections. Members should oppose any federal preemption of state and local anti-predatory lending laws.
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