House to Hold Hearing On Subprime, Predatory Lending

A U.S. House committee will host a hearing this week on subprime [bad credit mortgage] loans and predatory lending trends, following a tumultuous last few weeks in the lending sector.

The Subcommittee on Financial Institutions and Consumer Credit will head the hearing, which focuses on subprime lenders - or companies which loan money to people with poor credit.

During the housing boom, Florida mortgage providers crafted loans for many thousands of people who likely otherwise couldn’t afford to buy a home.

At the time, it wasn’t as big a problem because with home prices on the rise, a buyer could apply for Florida mortgage refinancing with relative ease if he or she ran into problems with payments.

But the market downturn has led to lower home prices and fewer home sales, forcing some Florida mortgage borrowers to default.

The trend has also pushed some subprime lenders to the verge of bankruptcy, and caused stock prices to plummet. Investors also worry that the troubles will spread to other parts of the economy.

Regulators are eyeing some bad credit Florida mortgage lenders for discriminatory practices that target the poor, minorities and the elderly - scams that have long existed but gone relatively unnoticed.

In the U.S. House, Democrats are drafting legislation intended aiming to curb predatory lending. One example of when this occurs is when a lender pressures a borrower into a high-interest loan they can’t repay.

The Department of Housing And Urban Development’s Office of Fair Housing has brought several charges against home loan lenders for predatory actions. Those enforcement efforts continue.

SOURCE: Business Week