CRL Warns Lawmakers of Foreclosure Risk

Martin Eakes, CEO of the Center for Responsible Lending (CRL), warned a group of federal legislators Wednesday about the escalating risk of home foreclosures due to predatory lending practices in the subprime market.

During a panel discussion in front of the U.S. Senate Committee on Banking, Housing, and Urban Affairs, Eakes asked lawmakers to instill a safety net in the exotic loan arena by “imposing a borrower 'ability-to-pay' standard on all subprime loans.”

During his presentation, Eakes also encouraged Congress to push for stronger legislation that will protect consumers from predatory lending practices and ensure broker integrity when operating in the marketplace on a client's behalf.

CRL created the suggested legislation after a study revealed two out of 28 adjustable-rate mortgages in the subprime market were never intended for families with poor credit histories. The CRL report also predicts that 2.2 million high-risk loans will end in foreclosure, costing families and the industry up to $164 million in losses.

Senator Chris Dodd (D-CT), who serves as chairman of the Banking, Housing, and Urban Affairs Committee, opened the hearing by saying the system is out of balance. "There is a chain of responsibility that makes these abusive loans possible," added Dodd. "I look forward to working with each link in that chain – the brokers, the bankers, Wall Street, the regulators, my colleagues on the Committee and in the Congress, and the administration – to help restore this balance for the sake of the safety and soundness of the banking system; for the sake of the homeowners who are being victimized; and to make sure that subprime credit can, once again, play a constructive role in the marketplace."

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