Mortgage lenders, emboldened by their success in dismantling bankruptcy protections, are targeting predatory lending laws in a move to savage existing federal rules and preempt state laws. This lender lobby has recruited Congressmen Robert Ney (OH) and Paul Kanjorski (PA) to introduce this legislation.
Another bill before Congress, drafted to champion consumer and civil rights concerns, cuts predatory loans and makes it easier to obtain a home loan. This bill is supported by Congressmen Brad Miller (NC), Mel Watt (NC), and Barney Frank (MA). and The Miller-Watt-Frank bill would eliminate loopholes in federal law rather than create new ones.
Predatory lending robs homeowners of more than $9 billion a year, The Center for Responsible Lending estimates, and threatens the poorest of homeowners: the elderly, minorities, immigrants -- those least able to survive these scams with homes and savings intact.
Predatory lenders, including some large financial institutions, threaten entire neighborhoods as people lured into borrowing more than they can afford at unconscionably high fees later lose their homes to foreclosure.
Read the differences between the bills and take action NOW! Click here.
Comparison of the two bills from the Center for Responsible Lending:
Points and fees definition for purposes of triggering protections for "high-cost" loans
Miller-Watt-Frank (H.R. 1182)
5%, includes prepayment penalties and yield spread premiums in addition to other origination fees.
Ney-Kanjorski (H.R. 1295)
5%, but fails to cover most prepayment penalties and appears to exclude yield spread premiums.
Flipping
Miller-Watt-Frank
Requires reasonable tangible net benefit on all home loans.
Ney-Kanjorski
Requires reasonable tangible benefit only on high-cost loans. Allows numerous exceptions and only applies if refinance is within two years of original loan.
Protections against high-cost abuses
Miller-Watt-Frank
Prohibits financing any fees on a high-cost loan. Requires counseling prior to obtaining a high-cost loan.
Ney-Kanjorski
Allows lenders to finance up to 5% of a high-cost loan (loans with upfront fees above 5% or high interest rates). Does not require any counseling prior to obtaining a high-cost loan.
Prepayment penalties
Miller-Watt-Frank
Includes prepayment penalties in points and fees.
Prepayment penalties in excess of 2% of the loan amount, or longer than 2 ½ years trigger high-cost loan protections.
Bans prepayment penalties for high-cost loans whose size is beneath Federal Housing Authority mortgage limits
Ney-Kanjorski
Does not include prepayment penalties in points and fees, unless the lender is refinancing its own loan.
Bans prepayment penalties on all home loans that would extend beyond 3 years from origination.
Permits large prepayment penalties (e.g. 4%-5% of loan amount) by allowing lenders to calculate penalty based on monthly interest payments rather than on the amount prepaid. Such calculation penalizes borrowers with higher interest rates.
Mandatory arbitration
Miller-Watt-Frank
Bans mandatory arbitration on all home loans.Ney-Kanjorski
Bans mandatory arbitration only on high-cost loans. Falls short of industry best practices.
Assignee liability
Miller-Watt-Frank
Maintains existing protections under the Home Ownership and Equity Protection Act of 1994 (HOEPA).Ney-Kanjorski
Rolls back current federal law protections for borrowers whose loan has been sold on the secondary market. Limits ability of borrowers with predatory loans to defend home from foreclosure.
Preemption of state laws
Miller-Watt-Frank
Sets a floor for minimum standards. Retains right of states to address mortgage lending abuses.Ney-Kanjorski
Wipes out effective state protections for homeowners.
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