WASHINGTON,
D.C. – U.S. Representative Jan Schakowsky (D-IL), a member of the House
Banking Committee, today testified before the Congressional Women’s Caucus
during a briefing on predatory lending. Schakowsky is the author
of H.R. 3901, the Anti-Predatory Lending Act of 2000, a bill to protect
consumers from financial predators. Consumer advocates and
experts also testified during the briefing.
Below
is Schakowsky’s statement.
“Last
year, the Chicago Sun-Times published a story about Luberta and Ulysses
Wright. Their troubles began when a contractor knocked on their door.
That contractor convinced them that they couldn’t live without a three-car
garage that he would build. On two occasions, he drove them to a
place to sign what they thought was an installment contract to do the work.
In reality, he had taken them to a subprime lender and they had signed
a $12,000 mortgage on their house. Nine thousand dollars was for
the garage; $1000 was for closing cost; and $2000 was a fee to the
contractor—not for building the garage—but just for arranging the mortgage.
Twenty-five percent of their up front cost had nothing to do with the garage
and that doesn’t count the interest that would come later. Then,
the contractor never showed to build the garage.
“Of
course, the Wrights took measures to protect themselves. They went
to the contractor’s office and found that the company didn’t exist.
They stopped paying the monthly bills only to see the lender start foreclosure
proceedings on their home. They appeared in court without a lawyer
and expected to easily explain their situation and end this problem.
It didn’t end until a month after Luberta Wright’s husband passed away
when she was finally able to reach an out of court settlement with the
lender.
“This
is the effect predatory lenders had on the Wrights and it’s the same story
for thousands of other families. Foreclosures in Chicago neighborhoods
have increased from 69 in 1993 to nearly 2,400 in 1999. And based
on hearings held by HUD and the Treasury Department around the country,
it's happening everywhere.
“The
Congressional Women’s Caucus should be particularly concerned about what
we heard from William Brennan at that hearing. For the past 12 years, William
Brennan has served as the director of the Home Defense Program of the Atlanta
Legal Aid Society, where he was one of the first to fight predatory lending.
He has found that predatory mortgage lenders purposely target vulnerable
elderly, minority, low and moderate income, women homeowners. Elderly homeowners
tend to have substantial equity in their homes but live on fixed incomes.
Consequently, they find themselves in a bind when that home needs expensive
repairs, or when they have incurred substantial medical bills not covered
by Medicare, Medicaid or health insurance, or when they suffer a loss of
income after the death of a spouse. They are then at the mercy of
predatory lenders because, as women or minorities, their access to legitimate
sources of loans and other financial services is disproportionately denied.
“To
protect those women and every potential victim from predatory lenders,
I have introduced H.R. 3901, the Anti Predatory Lending Act of 2000.
It sets national standards and changes current laws to protect consumers
from these con men. Lenders, who charge more than 5% above the interest
rate on U.S. Treasury issued bonds, which is now around 6%, would have
to answer to the courts. It would also attack predatory lenders who
hide costs in fine print or misrepresents those costs. It opens up
lenders to prosecution if they force borrowers into loans that they obviously
could not pay back. And it prohibits flipping, additional and unnecessary
insurance products, pre-payment penalties and appraisal coercion. Moreover,
it goes after brokers—like the contractor who ripped off the Wrights—and
Wall Street, too, because they also play a huge role in predatory lending.
“A
need exist for legitimate lenders in the subprime market. These lenders
offer credit to those with poor or no credit history. But what we’re
here to do is stop those lenders who take advantage of hard working families
and women. We have got to do something about that and I hope that
you will join me in this effort.” |