Posted on 03/20/2006 2:05:08 PM PST by ex-Texan
THANKS TO South Carolina’s anti-predatory lending law, borrowers are getting better loans.
Critics claimed such laws would cause subprime credit to dry up and make it tough for high-risk borrowers to get loans. But a recent report by the Center for Responsible Lending in Raleigh debunks that.
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In 2003, S.C. lawmakers, prodded by a small but game group of consumer advocates, did the right thing by approving a law that protects vulnerable consumers. Unsavory lenders — legalized loan sharks, if you will — had spent years ripping off unwitting consumers.
One study found S.C. borrowers were losing $107 million a year to bad lenders. Among other things, the state law limits the repeated financing of loans; limits the amount in points and fees that can be financed in a high-cost loan; and prohibits a prepayment penalty on home mortgage loans up to $150,000.
The Center for Responsible Lending examined 28 states with laws against predatory lending, analyzing 6 million subprime mortgage loans made between 1998 and 2004. The study compared borrowers’ experiences in states with reforms with those of people in states without such laws.
It found that in states with laws that go beyond federal protections, borrowers get fewer abusive loans, have ready access to subprime credit and pay about the same or lower interest rates.
The proportion of loans in South Carolina with abusive terms was 48.1 percentage points lower than in states without significant reforms. The number of subprime loans with abusive terms in the state dropped, while the number of nonabusive loans increased.
The interest rate on a 30-year, fixed-rate mortgage was 0.41 percentage points lower than in states with no significant law. The rate of a 30-year adjustable rate mortgage was 0.23 percentage points lower. The decrease could save thousands of dollars.
Meanwhile, the nation’s subprime mortgage market has grown from $34 billion in 1994 to $516 billion in 2004. Subprime lenders play a key role in providing credit to higher-risk borrowers who would otherwise not be able to get loans. Most predatory lending occurs in the subprime market. Anti-predatory lending laws are aimed at bad actors, not lenders who deal fairly.
The report should end an attempt in Congress to pre-empt state laws and approve federal legislation that would allow abuses to continue. The measure is stuck in committee, and it should die there. Congress must not tamper with states’ ability to protect borrowers.
In 1999, North Carolina passed the first comprehensive law regulating predatory mortgage lending. It was needed because abusive practices were rampant, despite Congress’ passage of the Home Ownership and Equity Protection Act in 1994.
The federal act was supposed to address abusive lending practices by providing extra protections for home loans made at a high cost. But the law only addresses refinancing, not initial home purchases. Also, lenders could still impose abusive prepayment penalties or repeatedly finance loans.
In North Carolina, a decline in predatory loans saved borrowers an estimated $100 million in the law’s first year. Laws passed by South Carolina and others also are making a difference, which is why Congress should butt out.
If it does anything, Congress should close loopholes in the Home Ownership act to protect consumers in states with weak protections, or none at all.
Lenders with BIG bucks will no doubt be wandering the halls of Congress looking to hand out millions in campaign contributions. Does the image of lobbyists with suitcases full of money ring a bell?
Let the battle begin!
How does this impact crooks who prey on the predators, by taking out completely fraudulent loans that they have no intention of repaying?
That sort of criminal misconduct is already illegal. If the borrower, lender, realtor, appraiser and mortgage broker are acting together it is a felony conspiracy. Worth about 50 years of hard time.
My ability to read protects me from that.
I'm going to have to start a web site and see if I get many hits from FReepers by putting links in every single solitary article I post.
There was a series in the Washington Times about the big problem, the mortgage brokers who sell these loans in the first place. It turns out that most states have minimal supervision and regulation of mtg brokers. Groups like ACORN always push for going after distant Wall Street firms that securitize mortgages (including the profitable subprime loans). However, there is very little effort to go after the local crooks/brokers who being local businessmen, probably have a nice relationship with local officials. There have been cases where Wall Street owned loan originators deliberately manipulated borrowers. But, looking at my local ads, the bigger problem is the friendly neighborhood dealer who offers 102% financing. Sometimes, people just shouldnt be allowed to borrow money.
*BINGO*! . . . Does anybody even know how much is cold cash has been delivered to local officials paid to look the other way? 'Nuff said.
Of course, what really constitutes "predatory lending"? People like to attach all sorts of meanings, some of which simply refer to sensible business practice. IMHO, the best definition would be "Lending money with the intention that it will not be paid back under the borrower's expected terms".
Bad anti-predatory lending laws are worse than none at all. Montgomery County, MD passed anti-predatory legislation with vague language like "too high rates" are punishable, and "too high fees" are punishable. Many lenders just decided to stop lending in the county. That would have been disastrous.
The issue is now in court on the grounds that this kind of law is a state function, not a county option.
Blog pimp alert.
Pimp alert
ex-Texan: "Pimp alert"
No need for that, extex, we can identify you just fine.
I took the time today to review your posts over the past several weeks. You repeatedly made outrageous allegations and picked fights with other FR posters. You even called them names like "Liar" in extravagant bold fonts. As if using mere caps was not insulting enough. (You have not heard about web etiquette, have you?) Your malicious intent becomes more obvious daily. What's a matter, booby? Do you have serious anger issues? Are going to 'go postal' next?
By the way, that web site is not regarded simply as “a blog.” It's actually a highly rated News Directory. Below are two of over 290 search engines on which that site is listed. That does not include search engines in 50 foreign countries and many foreign languages. It is listed easily in the top 35 alternative news sites. It is considered in the same category as the Drudge Report. SearchLeo News Directories . . . Excite Spanish News Directory
Notice that I did not mention the web site name or URL.
That's the most serious case of projection I have ever seen. There is no fault at all in calling someone a "liar" (in bold fonts!) when it is true.
For instance, I very recently used large bold letters to call Cindy Sheehan a big fat liar. Would you like to take issue with that assessment?
It is considered in the same category as the Drudge Report.
LOL You make that wild claim like it would be a good thing.
Notice that I did not mention the web site name or URL.
You're going to try to reform your incorrigible blogpimping ways? Congratulations. Never quit trying. The first step is admitting you have a problem.
You are a flaming, over the top Novel Pimp in addition to being a Disinformation Pimp. You are an expert in spinning outrageous charges and rabid obfuscation.
You are a broken kettle calling the pot black. Horrors!
For me to be a novel pimp, first the novel would have to exist in a final form available to the public. Second, there would have to be a web presence for that book. Third, I would have to be putting that link in almost every post I made. If those things were true, I would be like you: a blog pimp.
If the novel is published, and if at that time Jim Rob permits, there will be an announcement thread. There sure won't be a grating "read this blog read this blog read this blog" tone to my posts.
Instead, I've placed a piece of cover art on my profile page, where it belongs. Why? Because the profile page is a kind of "about the poster" device provided for just that purpose.
You simply don't understand the internet use of the term pimp, and you're flailing around for any pathetic criticism you can make up because you recognize your credibility swirling around the bowl...
Hoisted on your own petard . . .
You simply don't understand language very well.
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