The Housing Policy Council of The Financial Services Roundtable applauds the efforts of the Committee on the Underserved of the President’s Advisory Council on Financial Literacy and its Chair, John Hope Bryant to reinvigorate the subprime market through responsible lending practices and improved financial education for consumers.
HPC supports the mission of the Committee which is to ensure that responsible subprime lending continues in the future. We agree that financial literacy is an integral part of all responsible lending. We agree that responsible subprime lending plays a key role in making homeownership possible for many Americans and is a necessary part of a vibrant mortgage market. For many borrowers, demonstrating the ability to remain current on subprime loans can be an important way to show qualities that will assist them in attempting to obtain prime loans in the future. Subprime lending is crucial in promoting homeownership and it is critical that such lending be done in appropriate and responsible ways.
For the subprime lending market to recover and function properly, it is essential that efforts to improve subprime lending focus on principles to improve lending practices rather than attempt to identify specific products. The Housing Policy Council adopted a Statement of Responsible Non-Prime Lending Practices and Key Principles (available here), that states that lenders should only make home loans to borrowers whom they reasonably believe have the ability to repay the loans based on information available at the time the loan is made. In addition, loans should offer a demonstrable benefit to the consumer. Loan terms, features, benefits and risks should be disclosed to borrowers in ways that enable them to make an educated decision about the loan product that they choose. The timing and estimated amounts of future changes in monthly payments should be clearly communicated to borrowers in accordance with applicable disclosure laws and good business practices.
We look forward to continuing to work with the Committee and the President’s Council to ensure that responsible subprime lending contributes to Americans becoming successful homeowners and to promoting financial literacy for consumers as an important component of responsible subprime mortgage lending.