In 1999, North Carolina became the first state to enact legislation to curb predatory mortgage lending. Over the many years since, the North Carolina law has proven its effectiveness in curtailing predatory lending while preserving a robust subprime lending market.
During the first year after the law's passage, North Carolina's citizens saved an estimated $100 million as a result of the law. The law did not increase interest rates on subprime loans in N.C, and subprime lending continues to grow in the state (up an estimated 40% this year).
Abusive home lending practices, particularly among subprime mortgage refinances, cost U.S. consumers an estimated $9.1 billion every year. The North Carolina experience can be a model for reining in predatory lending. Any effective legislation must achieve these goals:
- Limit predatory practices and fees: abusive prepayment penalties that trap subprime borrowers in high-cost loans; kickbacks to brokers that encourage steering; and the financing of excessive fees.
- Prevent "flipping," abusive refinances that do nothing more than generate fees while stripping homeowners' wealth.
- Ensure homeowners have a right to pursue meaningful remedies and defend their homes against foreclosure even after their loans have been sold.
Assessing the Impact of North Carolina's Predatory Lending Law
Housing Policy Debate, 2004
Revised version of the 2003 UNC CCC study (below)
The Impact of North Carolina's Anti-Predatory Lending Law: A Descriptive Assessment
UNC Center for Community Capitalism, 6/2003
FAQs about the North Carolina Predatory Mortgage Lending Law
Center for Responsible Lending