2002-03-23 / Community

Sanders Battles Predatory Lenders

Sanders Battles Predatory Lenders

On March 12, 2002, City Council Speaker Gifford Miller was joined by Councilman James Sanders, Jr., and other council members, to announce legislation that would not allow the city to invest municipal dollars into banking institutions and their subsidiaries that engage in predatory lending practices.

At a press conference, Sanders called the 31st Councilmanic district, "the heart of the predatory lending zone."

Predatory lending occurs when a financial lender sends a persuasive salesperson and swindles homeowners into taking out loans they cannot afford. A growing number of financial lenders advertise this service to people in financial need, people who have fallen behind on property taxes, need money for medical bills, or face costly home repairs. Most predatory lenders target people with low-incomes and communities of color, particularly women and seniors.

"When coupled with high interest loans, these balloon mortgages make it difficult for borrowers to build or maintain equity in their homes," said James Sanders, Jr., Chair of the Committee on Economic Development.

"Because of the pressure of gentrification in certain neighborhoods that increase property values and home equity, some residents in low-income areas are ‘asset rich and cash poor.’ Unfortunately, this designation makes them prime targets for predatory lending," Sanders continued.

Although the Home Mortgage Disclosure Act (HMDA) requires lending institutions to report borrower’s race or ethnicity, income level and residence by census tract, studies done by the Department of Housing and Urban Development’s subprime-lenders list revealed that:

The predominately black neighborhoods in the city were over four times more likely to rely on subprime lenders as white neighborhoods to refinance mortgages (60 percent versus 13 percent, respectively).

Even borrowers in upper-income, mostly black neighborhoods are more reliant on subprime lenders than borrowers in mostly white neighborhoods.

The proposed law authorizes the City Comptroller to investigate financial institutions, and if the financial institution violates the law, their contract will be nullified.

"If you want to do business with New York City, then not only do your books have to be in order, but your practices have to be in order also," stated the councilman.

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