The Cumulative Costs of Predatory Practices

Appendix: Overview of lending topics covered in The State of Lending in America series
This Appendix provides a summary of the lending topics covered in prior State of Lending chapters.26
Abuses in Traditional Lending
Mortgages
Mortgages are a critical financial tool that enable families to both gain access to stable
housing and build long-term wealth. Abuses in mortgage lending over the past decade have
saddled families with unsustainable loans that have engendered millions of foreclosures and
destroyed generational wealth building opportunities. Thankfully, the worst lending practices
of the subprime boom—including loans with prepayment penalties, negative amortization, and
no documentation of income—were eliminated in the Dodd-Frank Act and are no longer part
of the mortgage market.
Although these consumer protections have been critical for consumers, the market has now
shifted to the other extreme: Overly restrictive credit requirements are preventing homeownership.
The Urban Institute has estimated that credit score requirements placed on new mortgage
originations have resulted in approximately 1.2 million fewer loans per year (Goodman et al.,
2014). This means that fewer creditworthy families are able to take advantage of one of the most
accessible ways to build wealth in the United States.
Policy Recommendations:
• Protect reforms that regulate harmful mortgage products.
• Promote effective foreclosure prevention activities and promote loan modification programs
that assist homeowners who are behind on mortgage payments/in danger losing their homes
to foreclosure.
• Avoid mandated downpayment requirements that limit access to mortgage credit for lowwealth
families.
• Support mortgage finance reform that prioritizes broad access to the mortgage market for all
qualified borrowers, including:
m An explicit, actuarially sound guarantee from the U.S. government for mortgages in a future
secondary market structure;
m Federally-mandated requirements that all secondary market entities that benefit from federal
guarantees serve all qualified homeowners, rather than preferred market segments; and
m A future mortgage finance system which encourages competition and offers broad market
access to the secondary capital markets for both small and large lenders.
26 For more information, please read the full chapters at http://www.responsiblelending.org/state-of-lending/
Center for Responsible Lending 39