Released: March 28, 2007

FDIC backs efforts to regulate subprime lenders

Source: USA Today

A top federal regulator Tuesday endorsed congressional efforts to pass legislation cracking down on predatory lending.

“We believe that the time has come for national anti-predatory-lending standards applicable to all mortgage lenders,” Federal Deposit Insurance Corp. Chairman Sheila Bair told a House Financial Services subcommittee.

Bair’s comments came as lawmakers heard from lenders, consumer groups and regulators about mounting defaults and foreclosures among borrowers holding subprime mortgages, higher-cost loans designed for consumers with impaired credit. Dozens of subprime lenders have gone out of business, and millions of mortgages could fail.

The problems have shaken Wall Street and given new impetus to congressional efforts to crack down on unfair and unsafe lending. Not all subprime loans are predatory, but predatory lending is clustered in the subprime sector. Predatory loans are generally defined as those with high fees, penalties or other costs that cannot be justified by the lenders’ risk or expense.

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