U.S. House to Hold Hearing On Bad Credit Mortgage Problems, Predatory Lending

A U.S. House committee will host a hearing Tuesday on subprime [bad credit mortgage] lending and predatory lending trends, following the tumultuous last few months in the mortgage market.

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

During the housing boom, mortgage banks crafted loan terms for people who likely otherwise couldn’t afford to buy a home. At the time, it wasn’t a huge crisis (or seen as one), because a buyer could apply for (and get) mortgage refinancing with relative ease.

But the housing market downturn has led to lower home prices and fewer sales, forcing some borrowers to default on their mortgages.

The trend has pushed some subprime mortgage 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.

Officials have eyed some bad credit home loan lenders for myriad possible discriminatory practices that target the poor, minorities and the elderly.

Senior Democrats are now drafting legislation intended to curb predatory lending - which occurs, for example, when a mortgage company pressures a home borrower into a high-interest loan they may not be able to repay.

The Department of Housing And Urban Development’s Office of Fair Housing has brought several cases against mortgage providers and insurers for predatory practices, and those enforcement efforts are continuing.

SOURCE: Business Week