Congressman Al Green Denounces Predatory Lending Practices as New Study is Released

Jun 9, 2006 Issues: Housing

(Washington, DC)--Congressman Al Green (TX-09) yesterday joined several of his colleagues on the Congressional Black Caucus (CBC) and Congressional Hispanic Caucus (CHC) at a press conference to discuss the findings of a new study that was conducted by the Center for Responsible Lending.  The report confirms that the highest cost home loans are much more likely to go to borrowers of color than to their white counterparts.  Other members attending the press conference included Representatives Mel Watt (NC-12), Barbara Lee (CA-09), Artur Davis (AL-07), Raul Grijalva (AZ-07), Joe Baca (CA-43), and Ruben Hinojosa (TX-15).

"It is a shame that we have to break down this issue of predatory lending into terms of black and white," Congressman Al Green said.  "However, the subprime market does not treat borrowers equally African American and Latino borrowers are more than 30 percent more likely than white borrowers to be given a high-cost loan.  Predatory lenders prey on people who are unfamiliar with the banking system, and they target people of color and others whose credit makes it difficult to get a prime loan."

The study, which was conducted by the Center for Responsible Lending, confirms information collected under the Home Mortgage Disclosure Act (HMDA) that demonstrates African American and Latino borrowers are more likely to receive higher-cost subprime home loans than their white counterparts.  The HMDA study shows that African Americans are 3.7 times more likely to receive a higher-cost home loan than white borrowers, while Latinos are 2.3 times more likely.  Many individuals in the lending industry have dismissed the significance of this evidence by claiming that the HMDA data did not include important risk factors such as credit scores.  The new study confirms that even after accounting for differences in credit scores and other risk factors, borrowers of color are more than 30 percent more likely to receive a higher-rate loan than white borrowers.

Congressman Green proposed several measures to end the practice of predatory lending, including a provision contained in legislation recently passed by the Ohio state legislature, which would require collecting the names of loan officers who engage in predatory lending practices in a database to be made available on a website.

"To eradicate predatory lending practices three things must be done:  There must be more testing to collect empirical data; we must engage in the outing of those who conduct this practice through the print and broadcast media; and we must address the practice of yield spread premiums," Congressman Al Green said.  "Yield spread premiums are the bonus a mortgage broker receives from a lender for placing borrowers in a loan with a higher interest rate when they will not qualify for a less expensive loan."

Next week, the House Financial Services Committees Subcommittee on Financial Institutions and Consumer Credit will hold a hearing on the newly collected data contained in the report.  Congressman Al Green is a member of the Financial Institutions and Consumer Credit Subcommittee.