SS: Could you say a word about predatory lending and the purpose of your most recent book?
Gregory Squires: Predatory lending is a subset of sub-prime lending that unfairly extracts resources from usually poor and marginalized people. It can have tremendous negative effects on people’s lives and on neighborhoods. The book’s purpose is to bring together scholarly work and focus attention on the issue and move towards impact on policy. To have a real book provides some legitimacy and credibility to arguments to other efforts to address predatory lending and to provide substantive information brought together in one place. The book should be useful to bank regulators, housing advocates, and others.
Chester Hartman: It’s also an activists’ book. It creates both an analytical and policy position that can’t be ignored. The other purpose is to identify a cadre of people – an organizing vehicle for both intellectuals and activists. We should not be surprised by predatory lending – this is part of an overall system where the poor and powerless get exploited.
SS: Why the emphasis on the poor?
GS: Clearly, predatory practices disproportionately affect racial minorities. But we also need to create a national constituency. In Montgomery County, they are trying to address the issue through a fair housing bill. If it flies, you could exploit anybody you want just as long as you don’t discriminate. Therefore, you might not be getting at the root causes of predatory lending [but] just making it “equitable”.
SS: In terms of a legislative framework, is DC more or less vulnerable?
GS: DC may be one of a handful of municipalities that passed an anti-predatory lending law. There may be more discussion of these issues in DC because of the presence of the federal government and the press. Lots of cities and states are debating anti-predatory lending laws. In DC, there is lots of talk because mainly, it’s the lenders themselves who want a federal law.
SS: Why do lenders want a federal law:
GS: Lenders want a federal law because of what they claim is an “irrational patchwork of rules and regulations” — many levels of government are passing a variety of laws. Lenders argue that there is a need for uniformity so that people can understand and, they would argue, to better protect people from predatory practices while making credit available to legitimate high-risk borrowers.
SS: Are lenders looking for harmonization and rationalization or dilution?
GS: Both. That’s part of the problem from the advocacy point of view. There is nothing wrong with uniformity. However, the proposals from the lenders weaken what is currently in federal law as well as other regulatory frameworks. The problem is not the uniformity; the problem is what they want to make uniform.
CH: It’s okay to have a high national standard as a floor, but still you want to allow localities and states to be able to up the ante a bit if they want. The primary goal is to protect people who are being taken advantage of by the system.
SS: President Bush’s administration talks about an “ownership society”. How does this relate to predatory lending?
GS: Predatory lending dramatically undercuts the efforts of an ownership society or helping people who might want to become a homeowner to do so and threatens the ability of marginal homeowners to stay homeowners. Sub-prime lending may well be important and does help marginal people get into homes, but when it becomes predatory, you are talking about people who end up not being able to maintain their payments or people who have some minimal life savings but end up getting lost because they invested it in a home, the payments for which they can’t keep up. People are losing their homes or their savings. I can’t think of anything [that will] more dramatically undercut the ability to achieve that goal than these kinds of exploitative practices.
SS: Should, in fact, home ownership be pushed as part of the American dream?
CH: Ownership is clearly not for everyone. Renting provides more mobility and less maintenance. There are all kinds of ways of owning that give some security. Ownership has three kinds of potential benefits: security of tenure (though it is not absolute under ownership), ability to fix up you space, and third is building some wealth and equity. It is possible to have security of tenure and the right to fix up your space without owning. For example, security of tenure can be done through rent control, eviction controls, conversion controls, through a system where the landlords and tenants are part of the same community. There are all kinds of ways of creating security of tenure without the burdens of owning.
GS: There is also a policy issue here. Because of the emphasis on homeownership, we are undercutting public investment in decent rental housing and rental support, making it more difficult for those who do not want to own and therefore have a decent living environment, which is what we promise people. It re-enforces the stigma that is attached to being a renter. The idea of home ownership and the ownership society has many positive things, but it also has severe costs –who benefits, and who pays?
SS: One of the ways to level the playing field is through community organizing. Are there forces working against local mobilization?
GS: Yes. One example is that Bush has proposed cutting the community development block grant program {CDBG] and moving it from HUD to Commerce. A lot of local organizations get their support from the CDBG. It may not be an expressed intention of the Administration to weaken community organizations, but it is clearly one way to do it. The push towards a federal law is also a way to limit local initiatives. There is an ongoing set of practices and tactics that are being utilized to try to blunt the effectiveness of local groups.
SS: Any advice for people who may be a victim of predatory lending?
CH: Victims are often embarrassed and afraid to take action. But the more people understand it’s a system – it involves a whole web of organizations – and not a personal issue, they may be more inclined to act.
GS: People who feel they have been mistreated by a lender should contact NCRC [the National Community Reinvestment Coalition] to talk about their rescue fund, or go to the FTC and file a complaint, or go to their bank and request a copy of its CRA [Community Reinvestment Act] file. From that document, people can get the name and address of the regulator who supervises the bank and file a complaint with that authority. If they are thinking of buying a home or taking out a home-improvement or refinancing loan, they might seek out a reputable mortgage counseling service.
CH: Although that can be a problem, too. Credit counseling has gotten kind of corrupt – predatory counseling. Lousy advice, big fees.
