Transcript Member Experiences/Associated Initiatives

Predatory Lending Symposium
Federal Home Loan Bank of Boston
Regional Perspective
June 12, 2007
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
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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 lowincome 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
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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
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Anecdotal Regional Observations

In addition,
 Lending based on foreclosure value of properties, rather
than the borrower’s 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
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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
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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
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