Final answer:
The federal government first addressed predatory lending in 1994 with the adoption of HOEPA, which provided additional protections against unfair mortgage terms and allowed consumers to seek legal action against lenders violating the act.
Step-by-step explanation:
The federal government first addressed predatory lending with the adoption of HOEPA, or the Home Ownership and Equity Protection Act, in 1994. HOEPA was an amendment to the Truth in Lending Act and it was implemented in 1995 by the Federal Reserve through Regulation Z (which was later transferred to the Consumer Financial Protection Bureau). The act was designed to provide additional protections to homeowners taking out mortgages with high rates and fees. Predatory lending often involves imposing unfair or abusive loan terms on borrowers, including high interest rates, high fees, and loan structures that can lead to increased indebtedness.
HOEPA targeted these predatory practices by requiring additional disclosures to consumers and by prohibiting certain loan terms such as balloon payments in some situations. Additionally, it gave consumers the ability to sue lenders who violated the act. This was an early federal response to predatory lending, preceding the more comprehensive reform that occurred following the mortgage crisis of the late 2000s.