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Homeownership is the cornerstone of wealth for most American families. For centuries, however, avenues to acquiring this critical asset were closed to communities suffering discrimination, particularly African Americans. Federal Housing Authority's redlining policies (werein whole communities of African-Americans were systematically denied FHA loans) were only exposed a little more than a decade ago. Since then, homeownership among people of color climbed as lenders offered credit to previously denied borrowers. At the same time, however, lenders also developed new "risk-based" guidelines -- marking the start of "subprime" lending.
The new subprime market opened some doors for homebuyers with damaged credit, but it also paved the way for newly discriminatory and predatory lending practices targeted mainly at minorities, single women, low-income people, and the elderly. The high rate of default and foreclosure associated with predatory home mortgages makes them a dangerous new threat to the economic security of millions of American families.
Historically, low-income borrowers faced problems in gaining access to credit. As the rise of predatory lending practices demonstrates, the problem today is ensuring access to credit on fair and affordable terms. This section provides an overview of the research and advocacy work on predatory home mortgage lending.
> Publications: Reports, Articles and Books
>Predatory Lending Remedies & Alternatives
>Regulatory Context and Legislative Action
> Organizational Links
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 "The Best Value in the Subprime Market: State Predatory Lending Reforms"
(Center for Responsible Lending: February 2006)
The report's findings show that state laws enacted to prevent predatory mortgage lending work as intended to reduce abusive loan terms without impeding credit. Strong state laws have been good for consumers while supporting a thriving subprime lending market. They provide credit-strapped families with plenty of access to responsible home loans at typical -- or even lower -- costs. At least 24 states have passed specific anti-predatory lending laws to supplement federal protections aimed at ending abusive mortgage lending practices.
"Fair Lending Discrepancies by Race, Income and Gender in All Metropolitan Areas of America"
(National Community Reinvestment Coalition: March 2005)
NCRC report used 2003 data to examine prime- and sub-prime lending disparities across race, gender and income lines. Found that sub-prime lenders issued a higher percent of their loans to African-Americans, Hispanics, low-and moderate-income (LMI) borrowers, women, LMI census tracts, and minority census tracts. While not all sub-prime lenders are predatory, abusive lending is more likely in communities receiving a disproportionate amount of sub-prime lending.
"The Impact of Predatory Loan Terms on Subprime Foreclosures"
(Kenan Institute, UNC Chapel Hill: January 2005)
The authors examine whether predatory loan characteristics increase the chance of mortgage foreclosure by estimating the impact of prepayment penalties and balloon payment requirements on foreclosure rates for refinance loans with an initial lien. Report offers policy recommendations based upon study findings.
"Borrowers in Higher Minority Areas Are More Likely to Receive Prepayment Penalties on Subprime Loans"
(Center for Responsible Lending: January 2005)
Study finds that while the vast majority of subprime loans contain prepayment penalties, borrowers in neighborhoods with high minority populations were more likely to receive such penalties. Discusses implications for homeownership rates in minority communities and the ability of such borrowers to build wealth.
"Borrowers Gain No Interest Rate Benefits from Prepayment Penalties on Subprime Mortgages"
(Center for Responsible Lending: January 2005)
Researchers at the Center for Responsible Lending test the claim that subprime mortgage borrowers are compensated for costs associated with prepayment penalties through the receipt of lower interest rates. Study finds that subprime borrowers do not receive interest rate subsidies, making prepayment penalties both unfair and anticompetitive.
Why the Poor Pay More: How to Stop Predatory Mortgage Lending (Gregory D. Squires, ed.: 2004)
A compilation of articles by scholars, legal experts and community leaders that sheds light on how predatory mortgage lending practices have evolved over time, reasons for their growing prevalence and how the negative consequences of this activity can be quantified. The book emphasizes the social, political and economic effects of predatory lending on communities.
"Rural Borrowers More Likely to Be Penalized for Refinancing Subprime Home Loans"
(Center for Responsible Lending: September 2004)
Using a nationwide sample of two million subprime mortgages, researchers find that predatory lending is a significant problem in rural America that hinders borrowers from taking advantage of improving credit or interest rate declines. While predatory lending is often viewed as an urban problem, certain abusive lending practices are more prevalent in rural areas than in cities.
American Nightmare: Predatory Lending and the Foreclosure of the American Dream
(Richard Lord, Common Courage Press: September 2004)
Explores the growth of subprime lending and the related spread of predatory lending practices. It shows the links between predatory lending and rising foreclosure rates. And it tells the stories of borrowers who've been taken, contractors and brokers who've been co-opted, lenders who've cheated - and the world's biggest financial titans, who've cashed in. As states try to rein in predatory practices, unscrupulous lenders and their backers have asked Washington to take their side.
"Oklahoma Coalition of Consumer Advocates' Predatory Lending Issue Brief"
(Oklahoma Coalition of Consumer Advocates: September 2004)
One-page issue brief on predatory lending in the state of Oklahoma.
"Credit, Capital and Communities: The Implications of the Changing Mortgage Banking Industry for Community-Based Organizations"
(Joint Center for Housing Studies at Harvard University: 2004)
Despite the expansion of lending to previously underserved communities, the changing structure of the mortgage industry poses a set of challenging public policy problems. Addresses what community-based organizations can, have, and should do to keep their advocacy and services in line with the rapidly changing industry and lending practices.
Taming the Sharks: Towards a Cure for the High-Cost Credit Market
(Christopher L. Peterson, Univ. of Akron Press: 2004)
"Banking on Misery: Citigroup, Wall Street, and the Fleecing of the South"
(Mike Hudson, Southern Exposure: Summer 2003)
Ground-breaking cover story of Southern Exposure magazine, relates how millions of Southerners have been ensnared by "subprime" lenders who target consumers made vulnerable by discrimination and financial need. Traces the rise to power of Sanford Weill, Citigroup's CEO, as he carved out a subprime lending empire. The issue includes other stories not available online (but available from Southern Exposure) on the "Poverty Industry" of high-cost financial services and on advocates' efforts to fight back.
"The Broken Credit System: Discrimination and Unequal Access to Affordable Loans by Race and Age"
(National Community Reinvestment Coalition: 2003)
This study, the largest and among the first of its kind, refutes the argument that subprime lenders are colorblind, and shows that African-American and elderly neighborhoods, regardless of the credit-worthiness of their residents, receive a disproportionate amount of high-cost subprime loans.
"Lessons Learned: Report of the Baltimore City Flipping and Predatory Lending Task Force" -Executive Summary-
(Community Law Center: May 2002)
Baltimore was designated by the HUD National Task Force on Predatory Lending as the "laboratory" for further examination of the many issues raised in the Joint Report. The task force concentrated on property flipping, mortgage fraud, and predatory lending; the prevention of illegal and unethical real estate practices, and for the creation of recovery plans for victimized families and neighborhoods.
"Separate and Unequal: Predatory Lending in America"
(ACORN: 2002)
Detailed site includes lending statistics for over 50 metropolitan areas.
"Risk or Race?: Racial Disparities and the Subprime Refinance Market"
(Calvin Bradford, Center for Community Change: 2002)
Documents the pervasive racial disparities in subprime mortgage lending and finds that the risk to the lender alone does not explain these racial disparities.
"Quantifying the Economic Cost of Predatory Lending"
(Eric Stein, Center for Responsible Lending: 2002)
Report estimates that U.S. borrowers lose $9.1 billion annually to predatory mortgage lending practices, which remain entirely legal under existing law. According to the report, only changes in federal and state laws will significantly reduce this figure.
"The Legal Fleecing of Poor Minorities: Do Corporations Like Beneficial and Ameriquest Prey on the Poor and Elderly?"
(Michael May, Tom Paine: 2002)
News story profiles one elderly woman's downward spiral into debt and calls into question the lending practices of mainstream instiutions that contributed to her situation.
"Subprime Foreclosures: the Smoking Gun of Predatory Lending?"
(U.S. Department of Housing and Urban Development: 2001)
Suggests that one of the best indicators of the predatory nature of subprime loans might be their disproportionate correlatation with mortgage foreclosures. (See also below.)
Brooklyn Racial Profiling Graphic: Predatory Mortgage Loans
(NEDAP NYC: 2001)
This graphic illustrates the concentration of sub-prime mortgage loans in Brooklyn, New York's neighborhoods of color, and compares this prevalence to the incidence of home foreclosure actions.
"Curbing Predatory Home Mortgage Lending: A Joint Report National Predatory Lending Task Force"
(HUD and U.S. Department of Treasury: 2001)
Recommendations of the Department of Housing and Urban Development and the Department of the Treasury for legislative and regulatory action to combat predatory lending while maintaining access to credit for low- to moderate-income borrowers.
"Unequal Burden: Income and Racial Disparities In Subprime Lending in America"
(U.S. Department of Housing and Urban Development: April 2000)
HUD study showing that predominantly black neighborhoods are fertile ground for subprime home lenders, as well as evidence that many of these lenders operate in a predatory manner.
"Credit Scoring and Mortgage Securitization: Implications for Mortgage Rates and Credit Availability"
(Andrea Heuson, Wayne Passmore & Roger Sparks: 2000)
By developing a model of the interactions between borrowers, originators, and a securitizer in mortgage markets, this paper finds conditions under which securitization can fail to lower the mortgage rate. In addition, this modeling shows that a decline in mortgage rates actually leads to increased securitization.
"Two Steps Back: The Dual Mortgage Market, Predatory Lending and the Undoing of Community Development"
(Daniel Immergluck & Marti Wiles, Woodstock Institute: Nov. 1999)
Point-by-point history of the rise of subprime lending, the statistical lending disparities between neighborhoods of color and predominantly white neighborhoods, as well as predatory lending and its relationship to public policy.
Community Development Financial Institutions and Solutions to Combat Predatory Lending
(National Community Capital)
A brief description of CDFIs and short listing of proven CDFIs currently in operation.
Neighborhood Assistance Corporation of America
NACA is a non-profit, community advocacy and housing services organization that offers sub-prime mortgages and refinances with no down payment, no closing costs, no fees, and below market interest rates.
Self-Help's Community Advantage Program
A partnership of Self Help, the Ford Foundation, and Sallie Mae that works to generate affordable mortgages for low-wealth homebuyers.
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"Predatory Lending: Who's Watching Your Back?"
(Laura Bruce, Bankrate.com: 2004)
A concise and balanced explanation of the ongoing battle between state bank regulators and the OCC regarding the OCC's pre-emption of state laws combatting predatory mortgage lending as regards to national banks.
Records of Pending Federal Predatory Lending Legislation
(U.S. Library of Congress: Updating)
Thomas is a search engine that allows users to search for bills and their status by entering the appropriate search terms, such as "predatory lending" or "mortgage."
State-by-State News, Laws, and Contacts
(Center for Responsible Lending: Updating)
Interactive map includes advocacy and policy contact information, recent news, and related state legislation.
North Carolina's Anti-Predatory Lending Law
(Best Practices of the National Governors Association: 2003)
The NGA Center for Best Practices focuses on state innovations, highlighting policies that have worked. Here, North Carolina's anti-predatory lending law is raised up for its success.
"Illinois Passes Anti-Predatory Lending Law"
(Woodstock Institute: June 2003)
Press release detailing the protections and limitations of Illinois' recently-passed "High-Risk Home Loan Act".
Letter to Congressman Oxley regarding Predatory Lending Bill
(National Consumer Law Center, January 2003)
A response to proposed federal predatory lending legislation, which the authors assert does not effectively target the most serious problems with predatory lending.
"State Initiatives to Battle Predatory Lending"
(Conference of State Bank Supervisors: 2000)
A listing of state-specific progress in educating citizens about predatory lending, examining the intricacies of the practice itself, and enforcing state laws and regulations that have not been preempted by federal law.
Senate Testimony of Thomas J. Curry, Massachussets Commissioner of Banks
(Conference of State Bank Supervisors: 2000)
A state regulator's perspectives on the practice of predatory lending. Highlights activity in nine states, and discusses federal preemption, maintaining that any preemptive measures must balance the needs of businesses and consumers.
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State and Local Advocacy Organizations:
To submit your state or local group, email us!
(Demos provides these links to facilitate grassroots mobilization on issues of economic security, debt, and assets.)
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ACORN (Association of Community Organizations for Reform Now)
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