Frank Circulates 'Dear Colleague' Letter on Predatory Lending
WASHINGTON -- In an environment of rising foreclosure rates, House Financial Services Committee Chairman Barney Frank (D-Mass.) sent out a letter to his fellow members of Congress looking for their support in determining government's role in the scenario.
"Foreclosure rates are rising, housing prices are stagnating and too many consumers are surprised to find out that their monthly payments are spiking," he wrote. "The difficulties have been concentrated in 'subprime' loans, which generally go to borrowers with limited or damaged credit, although there is evidence that some borrowers are shifted into the subprime category because they are African-American or Hispanic. Real damage has been done to families and communities as many adjustable-rate mortgage loans 'reset' to higher interest rates and monthly payments."
Frank stated that he is interested in holding a series of hearings to discover: (1) the scope of the problem and its implications for homeowners and the economy; (2) the causes of the problem, (3) what regulators, industry and community organizations are doing about it; and (4) what additional steps regulators and Congress can take to prevent similar situations in the future. "We will also be addressing the discrimination aspect of these activities," he added.
Some non-legislative actions are already taking place. However, a number of states have passed strong consumer protections in the area only to be preempted by federal regulators, which "Republican-led Congresses failed to address."
Any legislation, Frank said, must protect all Americans from predatory lenders, provide adequate and understandable disclosures, and ensure suitability of the loan to the borrower, while preserving credit availability. "We cannot return to redlining," he wrote. "We will remember that before predatory lending provided too much bad credit, many communities had little access to credit at all. We must end discriminatory lending practices."