The Two-Income Trap - Elizabeth Warren [128]
47 Paul Beckett, “Citigroup’s ‘Subprime’ Reforms Questioned,” Wall Street Journal, July 18, 2002.
48 For a thorough discussion of discrimination in mortgage lending, see Stephen Ross and John Yinger, The Color of Credit: Mortgage Discrimination, Research Methodology, and Fair-Lending Enforcement (Cambridge, MA: MIT Press, 2002).
49 Association of Community Organizations for Reform Now, Separate and Unequal: Predatory Lending in America (Washington, DC: ACORN, November 2002). Available at http://www.acorn.org/acorn10/predatorylending/plreports/SU2002/index.php [2/01/03]. See also Randall M. Scheessele, “1998 HMDA Highlights,” Working Paper HF-009, HUD, Office of Policy and Research (September 1999). Available at http://www.huduser.org/publications/hsgfin/workpapr9.html [2/18/2003].
50 HUD, Unequal Burden.
51 Congress recently considered legislation specifically targeting “loan to own” practices as an amendment to the current Truth in Lending laws. See “Illinois Association of Mortgage Brokers Backs Important Consumer Protection Legislation,” PR Newswire, April 17, 2000; Consumer Mortgage Protection Act of 2000, 106th Cong., 2nd sess., H.R. 4213.
52 Margot Saunders, director of the National Consumer Law Center, explained in testimony before Congress: “Based on equity, a lender is in an advantageous situation: either the borrower pays the loan back with high interest or foreclosure on the home permits a recovery from the property directly. In fact, when foreclosure occurs and the borrower’s property is sold to the lender for less than fair market value (as it generally is), the lender can resell the property after foreclosure and realize the homeowner’s equity. These anticipated windfalls encourage some lenders to make loans designed to result in foreclosure.” National Consumer Law Center, “Testimony Regarding the Rewrite of Truth in Lending Act and Real Estate Settlement Procedures Act,” Before the Subcommitees on Housing and Community Opportunity and Financial Institutions and Consumer Credit, House Committee on Banking, Financial Institutions and Consumer Credit, U.S. House of Representatives, 105th Cong., 2nd sess., September 16, 1998.
53 Mortgage Bankers Association of America, Foreclosure at End of Quarter, U.S. (Unadjusted %), unpublished data, December 2002. By comparison, foreclosures grew from 0.15 percent of all mortgages in the first quarter of 1979 to 0.37 percent in the first quarter of 2002, an increase of nearly 150 percent. We note that the number of homes in foreclosure grew faster than the number of foreclosures started. Little has changed in the legal procedures of foreclosure, so the difference in the proportion of homes in foreclosure is primarily attributed to the fact that today, once foreclosure proceedings have been started, a home is more likely to proceed through the foreclosure process than it was a generation ago. This suggests that families today are less likely than families were twenty-five years ago to come up with the money to pay the mortgage company or to sell the house rather than lose it in foreclosure.
54 Mary Kane, “Creditors Happy to Lend to Bankrupt Consumers, New Credit Lines Are Often Higher,” New Orleans Times-Picayune, July 20, 1997.
55 In the past few years, business consulting firms have given lenders essentially the same advice. For example, in 1997 Fair, Isaac & Co. released a bankruptcy predictor program that it claimed could eliminate 54 percent of bankruptcy losses by screening potential nonpayers from the bottom 10 percent of credit card holders. Available at www.fairisaac.com. “Credit Cards: Fight for Bankruptcy Law Reform Masks Truth,” American Banker 162 (September 8, 1997): 30.
56 A dozen years later, his view had clearly become part of the conventional wisdom among credit card insiders. Industry analysts routinely explain how hard it is “to differentiate between customers who are the most profitable