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I am honored to be in Atlanta today to co-host, along with Secretary Andrew Cuomo, the Atlanta Public Forum on Predatory Lending. Treasury believes it is critical to address the problem of abusive lending practices in order to have fully efficient credit markets. As Under Secretary for Domestic Finance, I believe that it is important to focus on ensuring that our nation's financial system works best for all Americans.
Greater access to capital, especially for those who traditionally have not had that access, is crucial for American families and the American economy. It is essential, however, that credit is provided in a transparent and non-abusive way. That is why we are working to ensure that the private sector continues to find ways to maximize credit access while assuring that predatory lending and other practices are not tolerated. Our meeting today will help us to gather important information on predatory lending practices and, in particular, the effects of these practices on homeowners in this region and on minority communities.
Access to capital has grown during this Administration at a remarkable rate. Last week, Treasury released a study showing that the Community Reinvestment Act is helping to increase competition in lending to lower-income borrowers and communities across the nation. Nationally, CRA covered institutions and their affiliates increased their lending to low- and moderate-income borrowers and communities by more than twice the rate of increases to other borrowers.
The Treasury CRA study offered evidence on lending in Atlanta that was particularly remarkable. The study found that Atlanta banks and thrifts were ahead of the national average, with 31 percent, versus 28 percent, of their mortgage loans going to low- and moderate-income borrowers and communities. Their share of mortgage loans grew almost twice as quickly as the national average between 1993 and 1998. In addition, unlike much of America, banks and thrifts in Atlanta have been growing more quickly in the low- and moderate-income markets in comparison to non-affiliated subprime lenders.
Expanded access to mortgage credit is also reflected in the report that HUD is releasing today, which details tremendous growth in subprime lending in Atlanta over the past several years. The growth of subprime lending has benefitted thousands of borrowers in this region who previously may not have been able to access mortgage credit. Clearly, both prime and subprime lenders are discovering profitable lending opportunities in lower-income Atlanta neighborhoods.
But we must remain vigilant that credit is provided to borrowers in a way that is transparent and not abusive. I'd like to reiterate three key principles that Treasury Secretary Lawrence Summers has suggested we consider in addressing problems in this area:
- First, we must empower consumers to make more informed choices about borrowing. Many of you in attendance today are helping to advance this principle in Atlanta and across the nation.
- Second, we must take steps to ensure that the abusive practices of some lenders do not overshadow or undo the enormous progress that families have made thus far. We are gathered here today to learn more about how to identify these practices, and to exchange ideas about how we can best prevent them.
- Third, we must continue to democratize access to capital in this country, and help more Americans to own their own homes, start their own businesses, and strengthen their communities. Broader access benefits not only individual families, but also our economy as a whole.
As Secretary Summers has said, abusive lending practices have no place in the subprime market, or in any other market. In our forum today, we hope to learn what types of practices are occurring in Atlanta that could lead to predatory lending. We need your help to sort through the many practices to identify those that are the real problems. In particular, we would appreciate any data or specific information you have on these questions:
- In your area, is there adequate competition and availability of credit?
- What practices do you view as the real problems in your area?
- Do you experience problems with loan flipping or excessive mortgage fees?
- Are you experiencing problems with financed home improvements?
- Is single-premium credit life insurance commonly offered in your community?
- Do lending practices in Atlanta's minority communities differ from those in its other communities?
- What other specific practices are you concerned about?
As we learn more about the nature and scope of these problems, we must find ways to combat abusive lending practices while continuing to provide needed access to credit for lower-income consumers. We look forward to working with you on these important matters.
Thank you.