March 27 (Bloomberg) -- As many as 2.4 million Americans may lose their homes because of the collapse of subprime lenders, the Center for Responsible Lending said in testimony to Congress.

Mike Calhoun, President of the Durham, North Carolina-based nonprofit group, told the U.S. House Committee on Financial Services that foreclosures will increase in coming months, and that subprime borrowing caused a net loss of a million U.S. homes between 1998 and 2006.

``Homeownership has been thwarted rather than supported'' by subprime loans, Calhoun said.

Because the majority of subprime loans are used to refinance existing mortgages and don't go to first-time homeowners, borrowers whose homes lose value are even more hard-pressed to make payments on their mortgages.

The Center, a research organization affiliated with the Durham community lender Self-Help, said that since 1998, 91 percent of subprime loans were used to refinance existing mortgages. 15.6 percent resulted in foreclosure, in which the bank takes possession of property, the group said.

Calhoun said that increasing the volume of home loans did not necessarily help expand homeownership. ``We have no quarrel with charging a reasonable interest rate premium on subprime home loans, but we take issue with an industry that routinely offers loans that are unsustainable. To truly build wealth through homeownership, we must make it clear that reckless lending practices will not be tolerated,'' he said.

He urged lawmakers not to ``abandon the homeowners who have been harmed by reckless subprime loans.''

Adjustable rate mortgages, which offer low introductory rates helped many people with low credit or little cash to buy homes.

Higher Payments

As introductory rates expired, home prices rose more slowly and many borrowers found they could not afford to make payments at the new rate. Subprime loans typically adjust to rates 2 or 3 percentage points above prime loans.

``One of the reasons people were willing to accept these mortgages is because they thought they would profit, they thought they would get rich,'' by owning homes, said Peter Schiff, author of ``Crash Proof: How to Profit From the Coming Economic Collapse,'' published this year by John Wiley & Sons.

``When all of a sudden the payments go up to what they need to be'' from the lower introductory ``teaser'' rate, ``people are going to lose homes, or they're going to have to cut back on other consumption,'' Schiff said in a telephone interview today.

Calhoun said the Center's research found that nearly 20 percent of subprime mortgages made in the past two years ``have already failed or will end in foreclosure and loss of the family's home.''

`More Tempered' Conclusions

Responding to Calhoun's testimony, Chris Stinebert, the president and chief executive officer of the American Financial Services Association, a lobbying group, said other analyses had reached ``more tempered'' conclusions.

``Mortgage lenders are tightening their credit standards --and some consumers are beginning to have difficulty finding loans,'' Stinebert said in a statement. ``Policy makers should take care not to accelerate this trend.''

House Financial Services Committee Chairman Barney Frank has said he wants to pass legislation by the end of the year that would set a national standard for banks and mortgage brokers and keep borrowers from loans they can't afford.

According to the Mortgage Bankers Association, subprime loans rose to 20 percent of new mortgages last year from 5 percent in 2001, and 13.3 percent of subprime borrowers were late on payments.

RealtyTrac, an online listing of foreclosed properties, reported yesterday that foreclosure filings last month rose 12 percent from a year earlier to 130,000 homes.

In California, the CRL told state lawmakers there yesterday, 450,000 homeowners will face foreclosure because of rising subprime rates.

A return to what Schiff calls ``prudent'' lending standards, including larger down payments and ensuring sufficient income to make monthly payments, will result in lower housing prices that are more in line with incomes.

``We can't take everybody's house and cut the value in half, and not expect the economy to be hurt,'' Schiff said.

To contact the reporter on this story: Stefan Whitney in New York at swhitney4@bloomberg.net.

Last Updated: March 27, 2007 16:08 EDT