State and federal officials from four states warned today that a bill in Congress would weaken laws against predatory mortgage lending in 36 states, especially the 24 states with major anti-predatory lending laws on their books. The officials are U.S. Rep. Brad Miller (NC), New Mexico Chief Deputy Attorney General Stuart M. Bluestone, Massachusetts Rep. John F. Quinn (Dartmouth) and New Jersey Department of Banking and Insurance - Division of Banking Director H. Robert Tillman.
The Ney-Kanjorski bill pending in Congress and supported by much of the lending industry would gut the strong laws in these states. Another bill, sponsored by Rep. Miller of North Carolina and supported by consumers and civil rights groups, would let states keep strong laws and protect their consumers.
Chief Deputy Attorney General Mr. Bluestone of New Mexico said: "Two years ago, New Mexico passed a progressive Home Loan Protection Act in response to an alarming rise in abusive mortgage lending practices and home foreclosures. Too many homeowners were losing home equity because dishonest lenders rolled points and fees into mortgage loans and did so repeatedly through abusive refinances. New Mexico's new law stops these abuses, but now Congress proposes in the Ney-Kanjorski bill to usurp our state's ability to protect our homeowners. That bill would gut our new effective law, install in its place a weak federal standard and prevent us from adequately protecting our residents from lending abuses."
Massachusetts Rep. John F. Quinn warned, "The passage of the Ney-Kanjorski bill would do irreparable damage to the protections afforded to consumers under the newly enacted anti-predatory lending law in Massachusetts. This bill is bad public policy and would weaken the ability of the states to protect consumers from unscrupulous lenders."
Reps. Brad Miller (NC) and Mel Watt (NC) and the ranking member on the House Financial Services Committee, Barney Frank of Massachusetts, have introduced a bill that prohibits abusive lending practices and ensures that everybody who can afford a home loan will get one. The Prohibit Predatory Lending Act of 2005 (H.R. 1182) is based on the State of North Carolina's predatory lending statute, widely considered the model for preventing abusive lending while preserving access to credit. Miller said, "This bill protects vulnerable consumers without cutting off credit for lower income borrowers. It's time that all American consumers have the protection that North Carolina consumers now have."
New Jersey Banking Director H. Robert Tillman said New Jersey's law both protected consumers and preserved the marketplace for subprime mortgages, where people with imperfect credit borrow and where most predatory lenders operate: "Our well-balanced law significantly reduces predatory lending…It appears that our state banks and licensed lenders have prepared for the new law and have helped create a more competitive market," said Executive Vice President Debbie Goldstein of the Center for Responsible Lending, a nonprofit that combats predatory lenders. "Rather than preserve and strengthen state and federal protections for homeowners, the Ney-Kanjorski bill wipes out state anti-predatory lending laws proven effective at preventing abusive practices and significantly weakens some protections available under the federal law today. This is a bad deal for consumers, who would be the real losers here."
Predatory lending encompasses a wide range of abusive practices by lenders who take advantage of vulnerable borrowers. Such practices include charging excessive fees and points, repeatedly refinancing home loans while stealing the homeowner's equity, steering consumers into more expensive loans and tacking on unnecessary and expensive extras like single premium credit insurance.
Since North Carolina's landmark anti-predatory lending law was enacted, the state has seen a dramatic reduction in abusive lending. A recent study by the University of North Carolina at Chapel Hill found that after passage of North Carolina legislation "there was a reduction of loans with predatory terms without a restriction in access to or increase in the cost of loans to borrowers."
According to the Center for Responsible Lending, 24 states have passed anti-predatory lending laws. At least 12 more have statutes that provide meaningful protections to borrowers but were not enacted as part of an anti-predatory lending law. Arkansas, Georgia, Massachusetts, North Carolina, New York, New Jersey, New Mexico and South Carolina are among those states considered to have the strongest laws. Other states with predatory lending laws include: California, Colorado, Connecticut, Florida, Illinois, Kentucky, Maine, Maryland, Nevada, Ohio, Oklahoma, Pennsylvania, Texas, Utah, Wisconsin, and West Virginia. Iowa and Kansas are just two examples of states with prior laws that help protect borrowers.
Finally, these laws ensure homeowners' rights are more than symbolic by providing for meaningful damages and allowing homeowners to defend their homes against foreclosure even after their loans have been sold to another lender.
Impact of Ney-Kanjorski on Massachusetts (PDF 115kb)
Impact of Ney-Kanjorski on North Carolina (PDF 113kb)
Impact of Ney-Kanjorski on New Jersey (PDF 120kb)
Impact of Ney-Kanjorski on New Mexico (PDF 120kb)