Federal Home Loan Bank of Boston. Federally chartere

1
Predatory Lending Symposium

• Federal Home Loan Bank of Boston
• Regional Perspective
• June 12, 2007

2
Federal Home Loan Bank of Boston

• Federally chartered corporation created by
  Congress in 1932
• Government-sponsored enterprise and is privately
  capitalized
• Mission is to serve the residential-mortgage and
  community-development activities of member
  financial institutions in the New England region
• Allocates 10 percent of net earnings to the
  creation and preservation of affordable housing

3
Community Lending Programs

• The Bank meets the needs of its members and
  communities by implementing the
• Affordable Housing Program which provides grants
  and subsidized financing for homeownership and
  rental housing for very low-income households
• Equity Builder Program which provides
  down-payment and closing cost assistance to
  income eligible households to purchase a home
• Community Development Advance which provides
  subsidized financing for community economic
  development initiatives including small
  businesses, schools, affordable housing, and
  social-service or public facility agencies
• Education and Outreach programs by meeting with
  local community banks and neighborhood leaders to
  determine viable solutions

4
Anecdotal Regional Observations

• On a regional basis, the following has been
  observed
• That foreclosures in New England are rising,
  primarily as a result of sub prime and predatory
  lending
• The sluggish housing market is slowing house
  appreciation, and in some cases, property values
  are declining, which is further exacerbating the
  foreclosure problem
• The current mortgage product mix is changing from
  conventional 30 year fixed rate loans to more
  exotic adjustable rate options
• The proliferation of mortgage products featuring
  changing mortgage payments that are tied to a
  specific index and start with low teaser rates

5
Anecdotal Regional Observations

• In addition,
• Lending based on foreclosure value of properties,
  rather than the borrowers ability to pay
• Fraudulent concealment of the true nature of a
  mortgage from the borrower
• Inducing borrowers to repeatedly refinance in
  order to generate high points and fees

6
Implications

• Regional implications from sub prime and
  predatory lending include
• The destabilization of communities
• Massive losses in homeownership that is setting
  hard-working families back
• Cause economic hardship in communities and for
  individuals

7
Regional Responses

• The following regional responses have been
  observed
• The development of financial literacy and
  mentorship programs that alert consumers to
  predatory lending
• The development of rescue loan programs to
  refinance existing borrowers that are in
  predatory loans
• Increased education and outreach campaigns
• Increased pressure from state and federal
  lawmakers to modify current lending practices
  several states have introduced bills
• FHLB member banks working with victims of
  predatory loans