National Association of Counties * Washington, D.C.      Vol. 33, No. 11 * June 4, 2001

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Community and Economic Development
Steering Committee Resolution on
Predatory Lending Practices

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Issue:
Eliminating predatory lending practices.

Adopted Policy:
NACo urges industry groups and government at all levels to implement programs and take legislative/regulatory action necessary to eliminate predatory lending practices.

Background:
Predatory lending practices are stripping homeowners and communities of their equity and wealth. Most of the targets and victims of these practices are elderly and low-income who live in neighborhoods that are distressed and underserved by traditional banking institutions. Large sums of both public and private funds have been invested in affordable housing and other improvements throughout these neighborhoods.

There is no one definition of predatory lending; however, a 2000 U.S. Department of Housing and Urban Development report identified several factors that tend to demonstrate mortgage lending processes that may be predatory in nature. They include refinancing loans with excessively high refinancing fees; including other fees that exceeded any economically justifiable amount; lending without regard to the borrower’s ability to repay; and outright fraud and abuse. The report recommended both new legislation and regulations to combat predatory lending.

NACo condemns predatory lending practices. Such practices negatively impact communities, families and individuals. In the past, NACo has strongly supported the Community Reinvestment Act (CRA). Among other things, the CRA has spurred over $1 trillion in loans and investments to traditionally underserved inner-city and rural communities nationwide. By assisting local governments in expanding private investment in these neighborhoods, the CRA improved the fiscal condition of many communities by strengthening their tax base. NACO supports efforts to modernize the CRA so that the Act is in alignment with tremendous changes taking place in the financial industry, including predatory lending practices. In addition, NACo supports public and private efforts aimed at increasing the financial literacy of citizens so that homeownership opportunities may be extended into underserved markets.

Fiscal/Urban Impacts:
Eliminating predatory lending practices will help spur investment in communities and contribute to revitalization efforts in distressed neighborhoods. Eliminating predatory lending will protect existing public and private investment in affordability and families.