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Predatory Lending Symposium

Predatory Lending Symposium . Federal Home Loan Bank of Boston Regional Perspective June 12, 2007. Federal Home Loan Bank of Boston. Federally chartered corporation created by Congress in 1932 Government-sponsored enterprise and is privately capitalized

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Predatory Lending Symposium

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  1. Predatory Lending Symposium Federal Home Loan Bank of Boston Regional Perspective June 12, 2007

  2. Federal Home Loan Bank of Boston • Federally chartered corporation created by Congress in 1932 • Government-sponsored enterprise and is privately capitalized • Mission is to serve the residential-mortgage and community-development activities of member financial institutions in the New England region • Allocates 10 percent of net earnings to the creation and preservation of affordable housing

  3. Community Lending Programs • The Bank meets the needs of its members and communities by implementing the: • Affordable Housing Program which provides grants and subsidized financing for homeownership and rental housing for very low-income households • Equity Builder Program which provides down-payment and closing cost assistance to income eligible households to purchase a home • Community Development Advance which provides subsidized financing for community economic development initiatives including small businesses, schools, affordable housing, and social-service or public facility agencies • Education and Outreach programs by meeting with local community banks and neighborhood leaders to determine viable solutions

  4. Anecdotal Regional Observations • On a regional basis, the following has been observed: • That foreclosures in New England are rising, primarily as a result of sub prime and predatory lending • The sluggish housing market is slowing house appreciation, and in some cases, property values are declining, which is further exacerbating the foreclosure problem • The current mortgage product mix is changing from conventional 30 year fixed rate loans to more exotic adjustable rate options • The proliferation of mortgage products featuring changing mortgage payments that are tied to a specific index and start with low “teaser” rates

  5. Anecdotal Regional Observations • In addition, • Lending based on foreclosure value of properties, rather than the borrower’s ability to pay • Fraudulent concealment of the true nature of a mortgage from the borrower • Inducing borrowers to repeatedly refinance in order to generate high points and fees

  6. Implications • Regional implications from sub prime and predatory lending include: • The destabilization of communities • Massive losses in homeownership that is setting hard-working families back • Cause economic hardship in communities and for individuals

  7. Regional Responses • The following regional responses have been observed: • The development of financial literacy and mentorship programs that alert consumers to predatory lending • The development of “rescue” loan programs to refinance existing borrowers that are in predatory loans • Increased education and outreach campaigns • Increased pressure from state and federal lawmakers to modify current lending practices – several states have introduced bills • FHLB member banks working with victims of predatory loans

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