Cummings Requests Stricter Scrutiny of FHA Investigation Criteria For Lending Institutions

December 10, 2009
Press Release

Cummings Requests Stricter Scrutiny of FHA Investigation Criteria For Lending Institutions
Congressman’s request comes after FHA shut down a Baltimore area lending institution found to be charging minority customers excessive fees.

(Washington, DC) – Congressman Elijah E. Cummings (MD-7) announced Thursday that he had sent a letter to Federal Housing Administration Assistant Secretary David H. Stevens, asking that he improve the procedures used to scrutinize lending institutions for fraudulent, abusive and predatory lending practices.

This request was made following Baltimore-area lender Equitable Trust Mortgage Corp. (ETM) being suspended by the FHA from writing new FHA-insured mortgages. ETM was found to be charging excessive broker and origination fees, with many of these overcharges coming in transactions involving minority borrowers.

Currently, lending institutions are examined, by FHA, for various “risk factors,” including default and claim rates, volume of mortgages originated, and types of mortgages being written.

Based on testimony given during House Oversight and Government Reform committee hearings, Congressman Cummings believes there is a need for additional protections in minority and low-income communities.

Congressman Cummings’ letter asks that, “…risk factors be adjusted to reflect consideration of the median income, as well as the level of minority representation in the area where the lender is operating.”

He also requests a report on the number of compliance reviews conducted, on site, by HUD from 2007 to 2009, with information in each review to include median income and racial makeup of the affected communities, as well as other data.

“More than fifty percent of foreclosures involve Black households,” said Cummings. “These are not isolated numbers. Our minority communities were taken advantage of, and the ETM suspension shows that practice continues to this day. If we are going to have a full American economic recovery, we cannot allow recovery efforts to treat communities hit the hardest exactly the same as those that were only slightly affected. Predatory and abusive lending devastated many black communities and we must make sure that never happens again.”

A study by the Furman Center for Real Estate and Urban Policy showed that black and Hispanic borrowers were targets of subprime lenders. A New York Times study showed that Blacks and Hispanics were two to three times more likely than white borrowers to have a subprime loan.