Predatory Lending

Habitat for Humanity strongly supports expanding financial literacy and homeownership counseling programs that teach consumers responsible borrowing practices.

Habitat for Humanity International recognizes that the regulation of predatory lending practices can be controversial because of the difficulty in defining the line between making credit available to someone who would not otherwise have access to credit and making an unscrupulous loan. In the same way, many legitimate mortgage lenders are engaged in fair and legal sub-prime lending, while other companies are taking advantage of vulnerable borrowers.

However, the issue continues to emerge as one of the most important issues to Habitat for Humanity affiliates. According to the Center for Responsible Lending, about 2.2 million homeowners with high-interest mortgages have either lost their homes or are projected to lose them in the coming years. This nationwide study noted that adjustable rate mortgages with steep built-in rate and payment increases, prepayment penalties, limited income documentation, and a lack of escrow for taxes and insurance are all responsible for the recent rise in foreclosures. African American and Hispanic homeowners, who often take out sub-prime loans because of limited access to other loan products, poor credit histories, and a number of other factors, are particularly affected.

Habitat for Humanity is interested in protecting potential homebuyers from predatory loans. Aggressively educating homeowners about the realities of predatory loans and increasing homeowner financial literacy are key ways to prevent foreclosures as a result of predatory loans.