Point of View: Lending Abuses Threaten To Spark More Defaults.(Excerpt)

Mr. Eakes is the CEO of the Center for Responsible Lending, a consumer advocacy organization that has called for a "suitability standard" in mortgage lending. While many in the industry disagree with the Center's policy proposals, we thought Mr. Eakes' recent testimony before the Sen. Banking committee might provide some insight into the concerns that are circulating about subprime mortgage performance. The following is an excerpt from his written testimony.

I testify as CEO of Self-Help (www.self-help.org), which consists of a credit union and a non-profit loan fund. For the past 26 years, Self-Help has focused on creating ownership opportunities for low-wealth families, primarily through financing home loans. Self-Help has provided over $4.5 billion of financing to over 50,000 low-wealth families, small businesses and nonprofit organizations in North Carolina and across the country, with an annual loan loss rate of under one percent.

We are a subprime lender. In fact, we began making loans to people with less-than-perfect credit in 1985, when that was unusual in the industry. We believe that homeownership represents the best possible opportunity for families to build wealth and economic security, taking their first steps into the middle class.

I emphasize this point because expanding access to homeownership has been central to Self Help's mission and it would be counter to everything I believe to recommend any policies that would diminish beneficial credit to families seeking a better future.

I am also CEO of the Center for Responsible Lending (CRL) (www.responsiblelending.org), a not-for-profit, non-partisan research and policy organization dedicated to protecting homeownership and family wealth by working to eliminate abusive financial practices.

The subprime mortgage market today is a quiet but devastating disaster. The ultimate effects are very much like Hurricane Katrina, as millions of citizens lose their homes and the fabric of entire communities is threatened. The difference is that this disaster in the subprime market is occurring every single day across the country, house by house and neighborhood by neighborhood.

Our analysis of subprime mortgages made in recent years shows that 2.2 million families will lose their home to foreclosure-foreclosures that were, for the most part, predictable and entirely avoidable through more responsible lending practices. As housing appreciation slows down in many areas of the country, it is clear that the problem will only grow worse. All indications are that subprime mortgage loans are headed toward the worst rate of foreclosures in modern mortgage market history.