State Leaders Tell Congress: Say 'No' To BillThat Would Create Financial Lion's Den

Leaders from states with strong predatory mortgage lending laws joined the Center for Responsible Lending to send a clear message to Congress: Any federal bill must not roll back state laws that protect citizens from predatory mortgage lenders. A Ney-Kanjorski bill pending in Congress and supported by much of the lending industry would gut existing state laws. Another bill, sponsored by Reps. Miller and Watt of North Carolina and Barney Frank of Massachusetts, is supported by consumers and civil rights groups, and would let states keep strong laws and protect their consumers. Click here for a side-by-side comparison.

The National Assn. of REALTORS^® joined CRL to design a Shopping for a Mortgage? Do Your Homework First. NAR policy wonks opine: "The Watt-Miller-Frank bill (H.R. 1182) would make the Home Ownership and Equity Protection Act stronger and does not preempt state law. The sponsors are all Democrats, which makes House action unlikely." We're hoping that NAR will send some of its talented lobbyists to round up some Republicans to co-sponsor this bill and make this a bipartisan effort for financial security.

New Mexico 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."

New Jersey Banking Director H. Robert Tillman said New Jersey’s law both protected consumers and preserved the marketplace for sub-prime 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."

North Carolina Reps. Brad Miller and Mel Watt and the ranking member on the House Financial Services Committee, Barney Frank (D-MA), 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  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."

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Comments

[JB Graves]

Great article! I'm a real estate broker in NC and I have been happy with our state lending practices to this point. I appreciate your article and will be posting a link to your blog from my own.

[Mary Bresnan, Student, Hofstra Law School]

I'm currently writing a paper comparing the Ney-Kanjorski and Miller-Watt bills. Have you seen this article from National Mortgage Banking News, claiming that Ney has stated that his bill will merely set minimum standards? I found it to be a shocking statement, and have been unable to find anything to support this contention? NMB must have gotten it wrong.
What do you think?

2 of 1177 DOCUMENTS

Copyright 2005 American Banker-Bond Buyer a division
of Thomson Publishing Corporation
National Mortgage News

October 10, 2005

SECTION: Vol. 30; No. 2; Pg. 2

LENGTH: 850 words

HEADLINE: Bill Doesn't Pre-Empt Licensing

DATELINE: WASHINGTON

BODY:
A predatory lending bill that calls for licensing mortgage brokers would not pre-empt the states from adopting stricter standards or the licensing of loan officers at banks and mortgage companies.
The predatory lending bill, sponsored by Reps. Bob Ney, R-Ohio, and Paul Kanjorski, D-Pa., would pre-empt state predatory lending laws in a establishing a national lending standard for high-cost subprime loans.
However, House Financial Services Subcommittee chairman Ney said Title V of his bill creates "minimum stan-dards" for mortgage broker licensing. Title V is not pre-emptive and does "not in any way limit the ability of states to go beyond those requirements for stricter standards," Rep. Ney said.
The bill (H.R. 1295) actually gives the states three years to pass a licensing requirement for mortgage brokers, be-fore licensing becomes mandatory under H.R. 1295.
The Mortgage Bankers Association generally supports the Ney-Kanjorski bill and the licensing of mortgage bro-kers, but they are concerned it would not prevent the states from licensing loan officers at mortgage companies.
Teresa Bryce, co-chair of MBA's state licensing task force, testified that the mortgage broker industry is in "great need" of licensing standards and a national database of licensed mortgage brokers would be very useful.
However, she complained that states are requiring licenses for loan officers and other personnel, even though mort-gage banking companies are licensed at the corporate level and highly regulated.
These additional licensing requirements are burdensome, Ms. Bryce said, adding to the cost of originations and placing state-licensed lenders at a competitive disadvantage to federally chartered lenders, which are exempt from state licensing.
"Unfortunately, Title V will do little to help mortgage bankers manage the thickening web of burdensome state li-censing laws," she said. "MBA encourages the committee to study possible federal initiatives that will assist mortgage bankers when dealing with state-level corporate licensing laws." Ms. Bryce is a senior vice president at Nexstar Finan-cial Corp., St. Louis.
The National Association of Mortgage Brokers also supports licensing of mortgage brokers and a national mort-gage broker registry. However, NAMB believes all loan originators should be licensed whether they work for a bank, a mortgage banking company or a broker.
NAMB past president Joseph Falk told the committee that loan officers move freely from broker shops, to banks and mortgage companies.
"A database of only state-licensed mortgage brokers would not prevent an unscrupulous actor ejected from one state's licensing structure from freely moving to another state," he testified.
Rep. Stephanie Tubbs Jones, D-Ohio, pointed out that most homebuyers, particularly low-income and minority homebuyers don't know there is a difference between mortgage brokers and loan officers. The congresswoman said both should be licensed.
North Carolina banking commissioner Joseph Smith Jr. told the House panel that the effectiveness of a national registry would be "dramatically reduced" if it does not list all originators who take mortgage applications from consum-ers.
"There should be a national data base of all originators so that bad actors caught in one state cannot easily go to an-other state," he said. Otherwise, "bad actors will be able to move among jurisdictions and employers, including exempt enterprises, such as banks and thrifts." Mr. Smith testified on behalf of the Conference of State Bank Supervisors.
CSBS and the American Association of Residential Mortgage Regulators currently are working an on Web-based registry of state-licensed mortgage companies, loan officers and mortgage brokers (see related story).
The American Bankers Association supports the licensing of independent mortgage brokers, according to Stephen Hailer, president and chief executive of North Akron (Ohio) Savings Bank. However, banks are subject to "rigorous government oversight and examination" and licensing bank loan officers is unnecessary, Mr. Hailer testified.
Subcommittee chairman Ney held the hearing on Title V because the licensing has become contentious.
He noted at the start of the subcommittee hearing that the bill is designed to protect consumers from predatory lend-ing practices and from bad actors who take advantage of borrowers.
"We must keep in balance the cost to lenders of licensing and registration and benefits the borrowers receive from those requirements," Rep. Ney said. The congressman did not indicate any plans to change the licensing requirements at the Sept. 29 hearing.
Rep. Ney is not expected to push for a House Financial Services Committee vote on the predatory lending bill this year.
However, Reps. Ney and Kanjorski are expected to work behind the scenes to forge a bipartisan consensus so the predatory lending bill will be ready to move when Congress returns next year.
(c) 2005 National Mortgage News and SourceMedia, Inc. All Rights Reserved. http://www.nationalmortgagenews.com http://www.sourcemedia.com

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