Anti-Predatory Lending Legislation

Rationale

Predatory lending refers to a number of lending abuses that take place within the so-called subprime mortgage industry. Under the guise of providing credit to borrowers with poor credit histories, predatory lenders often target the elderly, minorities, and poor families with lending products that can lead to a loss of home equity. These predatory lending practices include excessive fees that are collected up front, written into a loan, or charged at the back end (such as prepayment penalties). Practices also include risk-rate disparities, in which borrowers are charged a higher interest rate than risk can justify for a loan, and excess foreclosures. According to the Coalition for Responsible Lending, these predatory lending practices cost consumers an estimated $9.1 billion annually. Recognizing the need to protect homebuyers, homeowners, and other consumers from these deceptive, manipulative, and ultimately costly practices, a number of states have passed legislation to curb predatory lending.

About Measure

States that have enacted policies to curb predatory mortgage lending abuses (as of 2002). States get credit for the following policies: 1) state legislation or regulations that exceed federal law in defining and limiting points and fees and 2) state legislation that comprehensively defines points and fees charged in home loans and limits that amounts lenders can charge. A state receives 0 points if it does not have either of the policies, 0.5 points if it has one, and 1 point if it has both.

Source

Calculations by David Beck, Coalition for Responsible Lending, sponsored by Self-Help Credit Union (Personal communication, April 2002). Durham, NC.