Center For Responsible Lending: Subprime Hypocrites

Subprime economic destroyer

America has entered an economic depression. Much of the blame for this depression can be placed squarely upon the shoulders of mortgage lenders who chopped their way into the subprime market with a hatchet called optional adjustable-rate mortgages.

These types of loans were incredibly destructive to borrowers because they allowed homeowners to make monthly payments that were so small that they failed to cover the interest of the loan. As a result, borrowers typically were left owing more on their mortgages that they did before making payment. That is the definition of a “cycle of debt.”

The Center For Responsible Lending (CRL) claims to be against this

When you think of an advocate, what comes to mind? A person or group that pleads a cause in your best interests, right? This is exactly what the CRL positions itself to be for consumers. They present themselves as follows:

A nonprofit, nonpartisan research and policy organization dedicated to protecting home ownership and family wealth by working to eliminate abusive financial practices.

Thus, you would expect them to be against such exploitative practices as subprime lending, right? Their press kit brochure even makes it seem as if the CRL would have nothing to do with the “unscrupulous lenders” who used “abusive financial practices” to rope low-wealth homeowners into eating mortgages bigger than their heads.

But it simply isn’t true

The CRL had on its board the figurehead for abusive subprime lending, Herbert Sandler. A recent report by David Morrison of the Credit Union Times (“Sandler Mortgage Lending Controversy Touches CRL”) illustrates just how eager the CRL is to speak out of both sides of its mouth. The New York Times also turned up the heat on the CRL in their look at Sandler and his association with the CRL.

Sandler once sat on the board of the CRL. Various reports indicate that Sandler gave the CRL $20 million by mid-2007. So clearly there is a close association. There’s no way that much money changes hands, otherwise; it cannot be a casually acquaintance-type relationship.

There has been speculation that current CRL chair Martin Eakes was previously opposed to the controversial prepayment penalties written into mortgage contracts, but that Herb Sandler changed his mind. Pressure from the CRL prompted the Times to post a correction to their article about Sandler, Eakes and subprime lending. A telling part of the correction reads as follows:

During the housing boom, they were among those who persuaded Mr. Eakes of the acceptability of some proposed state regulations that would strictly limit, though not ban, prepayment penalties on the small fraction of prime mortgages that had them, including those from World Savings.

Looking at the part I bolded, it is not unreasonable to deduce that Mr. Eakes is not completely opposed to prepayment penalties. Interestingly, Morrison mentions in the aforementioned Credit Union Times article that CRL spokespeople claim that they’ve been against prepayment penalties all along, but that they have “limited their opposition somewhat, as part of a compromise toward legislation mandating tougher public policy on prepayment penalties on subprime loans.”

The elephant in the room

The CRL’s anti-subprime lending brochure makes the statement that the CRL does not support subprime lending. Furthermore, it presents a large number of vaguely cited statistics about subprime lending that, while possibly true, are almost universally not backed up with anything that would enable a free-thinking individual to follow up on their research in order to determine its truthfulness. By not providing a clear line for readers who want to see for themselves, the CRL is sloppy at best, irresponsible at worst.

The close association the Center For Responsible Lending has had with Herbert Sandler and subprime lending is the proverbial elephant in the room. Whenever it moves, it knocks over consumers who lack the experience or sophistication to know that proper research is important before buying rhetoric hook, line and sinker.