FOR IMMEDIATE RELEASE May 12, 2000

Schumer: Predatory Lending Is "Hijacking the American Dream"

Senator Joins Cuomo, Summers in Forum to Discuss Predatory Practices in New York and Ways to Crack Down

US Senator Charles E. Schumer made the following statement today regarding predatory lending practices by subprime lenders:

"Thank you, Secretary Cuomo. Last month, I released a report that shows that as far as New York's lending institutions are concerned, blacks and whites in New York City may as well be living on different planets.

"The report showed first, that blacks are twice as likely to be rejected for a mortgage from a conventional bank than whites. And even a black loan applicant with income greater than $60,000 is more likely to turned down for a bank loan than a white applicant with income less than $40,000. Second, conventional banks have little lending presence in New York's black neighborhoods even if those communities are strong, vibrant, and healthy. Third, as a result of a vacuum left by conventional banks, black neighborhoods are saturated with predatory lenders who exploit unknowing borrowers with loans that may eventually cost them their homes.

"Black neighborhoods are six times as likely as white neighborhoods to rely on subprime lenders which charge much higher rates and origination fees than conventional banks. Even in upper middle class black neighborhoods where the average family income exceeds $60,000, nearly half of all home loans were made by subprime lenders compared to less than 10% in white neighborhoods. It is disturbing to me that professional black families even have to consider going to a subprime lender to borrow for a home.

"I want to be clear that not all subprime lenders need to be reined in. Subprime lenders have made the American Dream of homeownership a reality for many Americans to whom that door would otherwise be closed, but subprime lenders who engage in predatory lending are hijacking the American Dream. The fact is that predatory lenders have filled the vacuum of conventional banks which have shown little interest in making home loans in black neighborhoods.

"I have sent this report to every bank in the area. I have introduced legislation to crack down on abusive lending practices. And I will be meeting with bank executives where I will challenge them to correct these inexplicable inequities.

"It breaks my heart to hear of families that spend 20 years saving to buy a home in a nice neighborhood like Laurelton, Baychester, or East Flatbush only to find that no conventional bank is interested in lending to them. Their only choice is a subprime lender who under the best of circumstances is more expensive than a conventional bank and under the worst is scheming to hijack the American Dream.

"I want to thank Secretary Cuomo once again. His commitment to this issue will make a real difference."

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