Knowledge Tree
Bartlett
Facts (10)
Sources
Predatory Lending Practices - House.gov commdocs.house.gov 10 facts
claimMr. Bartlett asserts that prepayment penalties are the critical factor enabling 'steering' in mortgage lending, as they prevent borrowers from refinancing to escape high-rate loans.
perspectiveMr. Bartlett argues that yield spread premiums and broker-lender relationships should be included in a 5 percent fee level, noting that the current legislative bill excludes back-end payments similar to the Home Ownership and Equity Protection Act (HOEPA).
perspectiveMr. Bartlett stated that he considers Bank of America, First Union, and Citigroup to be reputable companies that provide necessary credit access to individuals who would otherwise be denied.
perspectiveMr. Bartlett argues that the prohibition on prepayment penalties should apply to loans up to the conforming loan level for Fannie Mae and Freddie Mac (approximately $200,000) rather than the $150,000 limit included in the bill.
claimMr. Bartlett compares predatory lending practices, where lenders charge higher rates based on a borrower's lack of sophistication, to a hypothetical scenario where a retailer like Wal-Mart charges higher prices based on a customer's literacy level.
claimMr. Bartlett explains that without prepayment penalties, the marketplace would discipline 'steering' because lenders would not pay premiums (referred to as 'kickbacks' by consumer advocates) for placing borrowers in higher-rate loans if the borrower could easily refinance.
perspectiveMr. Bartlett, a witness at the hearing, expressed the view that it is positive for large financial services companies and banks to own subprime lenders because it allows them to offer credit to individuals who would otherwise not qualify for loans.
claimMr. Bartlett confirms that Bank of America, First Union, and Citigroup are members of his association.
perspectiveMr. Bartlett argues that 'steering'—the practice of placing a borrower into a higher interest rate loan than they qualify for due to their lack of financial sophistication—is an offensive practice incentivized by current lending structures.
perspectiveMr. Bartlett expresses a preference for the North Carolina bill's approach, suggesting the prepayment penalty prohibition threshold should have been $240,000 (adjusted for inflation) rather than the $150,000 limit.