Home Loan Protection Act: A Model State Statute

Subprime mortgage lending has expanded from a $35 billion industry in 1994 to a $140 billion industry in 2000. Subprime mortgages (loans granted to borrowers with non-prime or below “A” rated credit) currently represent 13% of total mortgage originations, an increase from 4% in 1994. With this growth has come increasing concern about – and growing evidence of – abusive practices in the subprime lending market, such as “flipping” and the inappropriate financing of points and fees. Abusive subprime lenders often target older homeowners who frequently have substantial equity in their homes, and who are more likely to live in homes in need of repair and less likely than younger homeowners to do the home repair work themselves.

This AARP Public Policy Institute model state statute – written by Mike Calhoun of the Self-Help Credit Union and Margot Saunders, Elizabeth Renuart and Mark Benson of the National Consumer Law Center – is designed to protect borrowers from abusive practices while maintaining homeowners' access to credit. (31 pages)