SUPPORT FOR FEDERAL LEGISLATION TO COMBAT PREDATORY LENDING

WHEREAS, many cities and communities have experienced a ten-fold increase in the number of subprime loans since 1993 according to a report published by the Department of Housing and Urban Development; and

WHEREAS, several federal regulators and others recognize that a subset of subprime lenders engage in predatory lending, which includes unscrupulous lending practices involving misleading marketing and high pressure lending tactics, excessive fees, exorbitant interest rates, and hidden loan terms; and

WHEREAS, these lending practices strip hard-earned equity from homeowners, including senior citizens, putting them at risk of foreclosure and damaging their credit ratings; and

WHEREAS, the increase in foreclosed and vacant homes leads to decreasing property values for neighboring homeowners, increased crime activity, and threatens neighborhood blight; and

WHEREAS, regulatory oversight and examination of the institutions engaged in these activities has been at best inadequate; and

WHEREAS, the U.S. Department of Housing and Urban Development , the U.S. Treasury Department, the Federal banking regulatory agencies, and the Federal Trade Commission have identified predatory mortgage lending as a serious problem in need of further action; and

WHEREAS, local and state governments have taken steps to prohibit certain lending practices in an effort to combat predatory lending; and

WHEREAS, a recent study by the Center for Community Change found that pervasive racial disparities exist within the sub-prime lending market, and that African Americans and Hispanics are disproportionately represented in the subprime home refinance market; and

WHEREAS, the studies findings suggest that racial disparities exist at all income levels, in all regions, and in cities and metropolitan areas of all sizes; and

WHEREAS, the Predatory Lending Consumer Protection Act of 2002 as been introduced in the United States Senate (S. 2438), and a companion bill (H.R.1051) has been introduced in the U.S. House of Representatives; and

WHEREAS, both bills promise to combat predatory lending and reduce the devastating impact lending abuse has upon our communities; and

WHEREAS, the bills are designed to strengthen current laws by closing gaps in the Truth-in-Lending Act (TILA) and the Home Owners Equity Protection Act (HOEPA); and

WHEREAS, the legislation amends HOEPA by tightening the definition of a "high cost mortgage" for which certain consumer protections are triggered,

NOW, THEREFORE, BE IT RESOLVED, that we, the United States Conference of Mayors supports the "Predatory Lending Consumer Protection Act of 2002"; and

BE IT FURTHER RESOLVED, that the USCM supports the proposal by the Board of Governors of the Federal Reserve Board to strengthen the Home Owner and Equity Protection Act (HOEPA), the key Federal statutory protection against predatory lending, by lowering the interest rate based trigger by two percentage points and by including single premium credit life products paid at closing into the fee-based calculation for determining coverage, and thus expanding the scope of high cost mortgages covered by this law; and

BE IT FURTHER RESOLVED, that the USCM supports the proposal by the Board of Governors of the Federal Reserve System to revise the reporting requirements for lenders under the federal Home Mortgage Disclosure Act (HMDA) to make the public disclosure statute a more useful tool for combating predatory lending by requiring loan reporting include information on the cost of credit, including the annual percentage rate (APR) and whether the loan is covered; and

BE IT FURTHER RESOLVED, that the United States Conference of Mayors, through a Task Force on Financial Literacy and Predatory Lending shall develop a comprehensive national strategy to combat predatory lending and to promote financial literacy among its citizens.