HUD declares war on predatory lending.

Calling it the "downside of an economic upturn" which has produced the highest homwownership rates in the nation's history, Housing and Urban Development Secretary Andrew Cuomo announced that he will convene a national task force and hold hearings to determine how to "eliminate the nightmare of predatory lending from the American dream of homwownership."

In testimony before the Senate Appropriations Committee, the Secretary said he would use authority under the Fair Housing Act and the Real estate Settlement Procedures Act (RESPA) to convene a HUD Task Force on Predatory Lending and conduct public hearings in at least four cities to recommend strategies to combat predatory lending. The first hearing will be in Baltimore, which HUD also intends to use as an operational laboratory to examine and address predatory lending practices.

The growing trend of predatory lending in the booming subprime mortgage lending market has been well-documented by regulators, including the Federal Reserve and EDIC, academics and community groups. Evidence indicates that the vast majority of mortgage fraud and predatory lending activities - including excessive fees, provision of credit life insurance and prepayment penalties - occurs in the conventional subprime lending market. Subprime lenders generally do not make government-backed loans and often operate outside of the current federal regulatory structure.

"The economic boom which has produced the highest homeownership rate in history has a downside and that is predatory lending," Cuomo said. "Though HUD has moved aggressively to eliminate thousands of unqualified appraisers and dozens of lenders from FHA housing programs, the simple fact is that many of these same lenders and appraisers are in the conventional mortgage often charging exorbitant fees, imposing onerous terms and saddling families with debts they'll never be able to retire. Just as HUD has moved to eliminate predatory lending from FHA programs, we must move and move now to eliminate them from the conventional market."

The Real Estate Settlement Procedures Act, passed in 1974, was intended to help homebuyers fully understand the terms of their loans and to protect them against terms or practices that could cause them to lose money, credit worthiness or their homes. Under RESPA, the HUD Secretary is authorized to conduct hearings to investigate conditions and practices that bear upon provisions of the Act and to prescribe regulations or recommend legislation to correct any problems. The Secretary is also empowered to issue subpoenas in furtherance of these hearings.