(Editor's note: The following information is provided courtesy of the Center for Responsible Lending.)

"If you give me a mortgage payment I can afford, I am a good risk."

- Amy Womble, a widow from North Carolina who received an adjustable-rate subprime mortgage with total monthly payments that require 86% of her income.

On February 7th the Senate Committee on Banking, Housing and Urban Affairs held a hearing on predatory lending and foreclosures in the high-cost subprime mortgage market. Among the civil rights leaders and consumer advocates testifying, several key themes emerged:

• Foreclosures in the subprime market have reached dangerously high levels, hurting individual families and entire neighborhoods.
• The dominant product in the subprime market is the "exploding" adjustable-rate mortgage, which, combined with lax loan underwriting, is driving record level of foreclosures that are devastating low-wealth families.
• While lenders and borrowers once had a common interest in sustainable home loans, today there is a disconnect, since brokers and lenders limit their liability by selling loans to investors. Today homeowners have the most to lose by far.
• Mortgage brokers present themselves as experts and mentors, but they have no fiduciary duty to serve the best interests of consumers—unlike lawyers, investment advisors and Realtors.
• Abuses in the subprime market are a major civil rights issue, since African-American and Latino families receive the highest share of subprime mortgages—even though the Federal Reserve Board and others have presented evidence indicating that people of color are often overcharged based on their qualifications.

Witnesses for the hearing included two prominent civil rights leaders, the Reverend Jesse Jackson of the Rainbow Push Coalition and Hilary Shelton of the National Association for the Advancement of Colored People. Other witnesses were Jean Constantine-Davis (AARP), Douglas Duncan (Mortgage Bankers Association), Harry Dinham (National Association of Mortgage Brokers), and our own Martin Eakes (Self Help and the Center for Responsible Lending). Two consumers, Delores King and Amy Womble (from Chicago and Pittsboro, N.C., respectively), also provided compelling testimony describing how they received abusive subprime loans that quickly became unaffordable. Both women are now in danger of losing homes they have owned for years.

Doug Duncan of the MBA declined to concede that skyrocketing levels of foreclosures represent a crisis, but Eakes said that even CRL's own projections of a 20% foreclosure rate for recently-originated loans are understated, since they are based on individual loans rather than the actual experiences of homeowners. Families in the subprime market often refinance multiple times as they try to get out of unaffordable loans, and each time there is a risk of foreclosure. Eakes noted that only 13% of all outstanding mortgages are subprime loans, but over 60% of loans in foreclosure are subprime.

To address the epidemic of foreclosures in the subprime market, CRL and our allies are calling for (1) an "ability to repay" standard for all loans to ensure that borrowers can afford them for the long term, not just for the initial teaser period; (2) a fiduciary duty for brokers; (3) regulatory action by the Federal Reserve, which has long held the authority to address abusive mortgages; (4) prohibitions against allowing government-sponsored enterprises, Fannie Mae and Freddie Mac, from getting affordable housing credit for purchasing securities that include abusive subprime loans; and (5) the passage of a strong national anti-predatory lending law that would provide higher minimum standards for subprime loans.

To view Eakes' written testimony submitted to the Committee, click here (PDF). To find out more about subprime foreclosures, see CRL's recent research based on over six million subprime loans at click here.