CRL in the News
Our primary concerns are ensuring that the system provides for access and affordability for all creditworthy borrowers. Right now creditworthy borrowers are being locked out of the system and being underserved. When we look at recent HMDA [Home Mortgage Disclosure Act] data — specifically the 2015 data — we are concerned to see low levels of conventional lending to borrowers of color and to lower-wealth families overall.
In the late 1990s, leaders at Self-Help Credit Union began to notice a disturbing trend. While Self-Help was helping lower-wealth families buy their first homes, predatory lenders were busy targeting the same families for subprime refinances. Too often these refinances drained the homeowners’ resources until they lost their homes. When a borrower came to us owing more than $47,000 on a house that originally cost $29,000, we knew we had to act.
Ezekiel Gorrocino, a policy associate for the Center for Responsible Lending, a North Carolina-based nonprofit that fights predatory lending practices, described the legislation as a “prepackaged” bill that payday lending companies have pushed over the past few years across the country.
“This extreme legislation would put the foxes back in charge of guarding the hen house by putting big banks and predatory lenders back in charge of our economy,” Yana Miles, senior legislative counsel for CRL, said in a statement.
Under the qualified mortgage rules, banks are largely banned from offering certain "harmful loan features," such as an “interest-only” period, loan principals that increase over time, balloon payments that come due at the end of a loan term and loan terms longer than 30 years. Such loans are safer for the financial industry and perform better for banks, says Sarah Wolff, senior researcher at Center for Responsible Lending.
One clear lesson from the financial crisis is that common-sense rules of the road in our financial markets would have prevented the damage. It may seem amazing now that banking regulators would have to pass rules requiring lenders to make sure borrowers could actually repay mortgage loans, but that was the case only seven years ago.
The non-partisan Center for Responsible Lending says the debt burden falls on low-income, female and minority students who disproportionately enroll at Maine for-profit schools. About 75 percent of students at such institutions take on student loans, compared with 66 percent and 41 percent, respectively, at private and public institutions.
Maine students attending private, for-profit colleges are quicker to borrow and slower to repay their student loans when compared to the their counterparts across the country, according to the Center for Responsible Lending.
Diane Standaert is with the Center for Responsible Lending. That group has heard from borrowers that title pawn employees often don't offer up details about the length or cost of the loans. Standaert said federal regulators have been working to change that.
Yet banks are very much involved in the lives of the unbankable. They securitize and sell payday loan and car title loan debt. Title loans take the borrower’s car as collateral—when the note comes due the borrower can either re-borrow, pay fees or lose the car. Combined, these two loan types drain over $8 billion a year from consumers, said Diane Standaert, executive vice president and director of state policy at the Center for Responsible Lending. The average costs hit a 300 percent annual percentage rate. “Both types of loans are structured to keep borrowers stuck in long-term debt.