Curbing Predatory Home Mortgage Lending
June 2000 (119 pages)
June 1, 2000
Based on information gathered at five field forums by the joint HUD-Treasury Task Force on Predatory Lending, the report, Curbing Predatory Home Mortgage Lending, proposes a four-point plan to address predatory lending practices:
- Improve Consumer Literacy and Disclosures. Creditors should be required to recommend that high-cost loan applicants avail themselves of home mortgage counseling, disclose credit scores to all borrowers upon request and give borrowers more timely and more accurate information as to loan costs and terms.
- Prohibit Harmful Sales Practices in the Mortgage Market. Practices such as loan "flipping" and lending to borrowers without regard to their ability to repay the loan should be banned. New requirements should be imposed on mortgage brokers to document the appropriateness of a loan for high-cost loan applicants, and lenders who report to credit bureaus should be required to provide "full-file" payment history for their mortgage customers.
- Restrict Abusive Terms and Conditions on High-Cost Loans. We recommend that Congress increase the number of borrowers in the subprime market covered by legislative protections; further restrict balloon payments on high-cost loans; restrict prepayment penalties and the financing of points and fees; prohibit mandatory arbitration agreements on high-cost loans; and ban lump-sum credit life insurance and similar products.
- Improve Market Structure. Award Community Reinvestment Act (CRA) credit to banks and thrifts that promote borrowers from the subprime to prime mortgage market, and to deny CRA credit to banks and thrifts for the origination or purchase of loans that violate applicable lending laws.