Nineteen other states considered new laws in 2001. Predatory Lending Explodes over the Last Decade Predatory lending occurs predominantly in the subprime mortgage industry. While subprime lenders fill a legitimate need, some are giving the industry a black eye with unscrupulous, predatory practices.
Predatory lenders provide high-cost loans to borrowers who they know qualify for conventional loans.
The chairman of Fannie Mae estimated that as many as half of subprime borrowers could have qualified for traditional mortgages at lower interest rates. Predatory lenders also jack interest rates above what is reasonable within the industry and charge excessive fees, simply because they can get away with it. The problem has increased as the subprime lending market has skyrocketed. Nationally, subprime lending grew 900 percent from 1993-99, and most dramatically in minority communities. Subprime loans now account for 51 percent of all refinancing mortgages in predominately African-American neighborhoods, compared to nine percent of loans made in predominantly white neighborhoods.