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Predatory Lending
Predatory Lending Costs consumers and taxpayers millions of dollars each year AND removes people from their homes. States are acting to shut it down, but now the US Congress is getting involved.
Source: acorn.org, 2003-01-03
Candidate: Big Business
In yet another attempt by the Banking industry to further entrench themselves in the tax payers pockets, the Congress is considering federalizing predatory lending practices.Congress Considers Preempting All State and Local Laws on Predatory Lending
Jan. 3, 2003
As a result of Congress's failure to adequately protect borrowers from predatory lending, several cities and states (see list below) have enacted their own protections. A number of states have "preempted" (banned) local laws but not put in place any significant protections at the state level. Now Congress is considering taking the same step at the federal level, seizing powers from states and cities precisely in order not to use those powers.
Rep. Bob Ney, R-Ohio, a member of the House Financial Services Committee, has been passing around a draft for a bill that bans states from passing laws to protect borrowers. This bill was co-written by Wright Andrews of the firm Butera and Andrews, which represents a coalition of subprime (high-cost) lenders. A House Banking Committee Democrat, Ken Lucas of Kentucky, has already signed on as a cosponsor to Ney's preemption bill. The Ney bill will be quietly presented as a consumer protection measure, whereas in reality it weakens the already inadequate federal protections and eliminates every protection put in place by states and localities.
ACORN is organizing opposition to this effort around the country and will be urging cities to pass a resolution opposing federal preemption. Last week Pittsburgh City Council was the first to pass this resolution.
The following associations have already written to the Comptroller of the Currency opposing his version of federal preemption: the National Association of Attorneys General, the National Governors Association, the U.S. Conference of Mayors, the National League of Cities, the National Association of Counties, the National Association of Local Housing Finance Agencies, and the National Council of State Legislators.
Retiring House Financial Services ranking member John LaFalce, D-N.Y., and outgoing Senate Banking Chairman Paul Sarbanes, D-Md., introduced serious anti-predatory lending legislation during the last Congress, bills that would have protected borrowers and allowed states and cities to protect borrowers.
THE CASE AGAINST FEDERAL PREEMPTION:
· People are being robbed of their equity and of their homes through predatory loans designed not to be repaid but to strip equity, loans that include terms beneficial to no group of borrowers.
· Many predatory practices are legal under current federal law.
· State and city laws have saved borrowers millions of dollars without hurting the legitimate subprime lending industry.
· States that have preempted local laws have not protected borrowers at the state level.
· If higher levels of government would protect borrowers, lower levels of government would be happy not to have to do so.
WHY ACORN OPPOSES THE NEY “PROTECT PREDATORY LENDERS” BILL:
The overriding purpose of the industry-driven, draft Ney bill is to preempt state and local consumer protection laws against predatory lending abuses. Every day, these loans strip away hard-earned home equity and trap families in excessive interest rates, frequently resulting in foreclosure. But even leaving aside the destructive impact of preemption, the Ney bill would be a huge step backward in the fight against predatory lenders. Don’t be fooled by the Orwellian attempt to label the bill as anti-predatory lending legislation.
Background
The current federal law on high-cost home loans (called ‘HOEPA’) has failed to prevent the abusive lending practices that have become so widespread in recent years. Sadly, the vast majority of predatory loans are completely legal under federal law, since HOEPA’s weak protections apply to only a tiny slice of the highest-cost mortgages (loans with fees above 8% of the loan amount – banks charge around 1% – or APRs above 13% or 14%).The Ney Bill
Thresholds – Rather than remedy HOEPA’s failure to cover so many high-cost loans, the bill keeps the same rate thresholds and effectively maintains the ‘points and fees’ threshold. In a cynical maneuver, the bill “lowers” the ‘points and fees’ threshold from 8% to 6%, but then exempts 2 discount points without any real requirement that the points lower the interest rate. In addition, it opens up new loopholes for lenders to avoid counting costs paid by borrowers toward the calculation of ‘points and fees.’
Protections – Because the bill doesn’t change the thresholds for high-cost loans, its meager new protections would have almost no impact. But even those provisions fall well behind steps major subprime lenders have been forced to take in response to public outrage and government investigations. And the bill seriously weakens HOEPA’s enforcement provisions, most notably in virtually eliminating assignee liability, which ensures that borrowers do not lose legal rights if their loan is sold on the secondary market.
Other Items – The bill would fully legitimize yield-spread premiums – kickbacks lenders pay to brokers for jacking up borrowers’ interest rates – costing homeowners billions of dollars each year. It would also prevent the federal Office of Thrift Supervision from moving forward with its final rule to reinstate state law limitations on prepayment penalties and late fees.
Housing Counseling – The national infrastructure of HUD-certified housing counseling agencies has played a key role in getting the word out about predatory lending, helping borrowers refinance out of bad loans, and informing homeowners targeted for high-cost refinances of less expensive options. Rather than assist the efforts of these private non-profit agencies, the Ney bill would impose another layer of bureaucracy on them in the form of a new industry-dominated board that would needlessly duplicate HUD’s work on its Housing Counseling program. The board would standardize all materials agencies distribute on predatory lending, when many of the most effective flyers are aimed at particular populations or geared toward specific local problems.
State Laws That Restrict Predatory Lending:
California, Georgia, North Carolina, New York. (With New Jersey expected to pass a bill this month.) Of these, the California, Georgia, and North Carolina laws are already in effect.
City Laws That Restrict Predatory Lending:
Oakland, Calif.; Los Angeles, Calif.; New York, N.Y.; Washington, D.C.; Chicago, Ill.; Philadelphia, Penn. (preempted by state); Cleveland, Ohio (preempted by state); Dayton, Ohio (preempted by state); Detroit, Mich. (preempted by state).
State Laws That Preempt Local Laws on Predatory Lending:
Pennsylvania, Florida, Colorado, Ohio, Maryland, Michigan.
State Regulations That Restrict Predatory Lending:
Illinois, Massachusetts. Of these, the Massachusetts regulations are in effect.
State Regulations That Simply Mirror Federal Law
Connecticut.
ACORN is an acronym, and each letter should be capitalized. ACORN stands for the Association of Community Organizations for Reform Now. ACORN is the nation's largest community organization of low- and moderate-income families, with over 120,000 member families organized into 600 neighborhood chapters in 45 cities across the country. Since 1970 ACORN has taken action and won victories on issues of concern to our members. Our priorities include: better housing for first time homebuyers and tenants, living wages for low-wage workers, more investment in our communities from banks and governments, and better public schools. ACORN's website is at http://www.acorn.org. To receive updates on ACORN's work every two weeks go to http://acorn.org/getinvolved.
Contact:
David Swanson 202-547-2500
Chris Saffert 718-246-7900
Greg Jefferson 202-547-2500
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User Originated Comments:
From: PWH IN Indiana
2006-01-25 00:00:00
can someone please help us? we had a mortgage loan
through ameriquest who sold our loan to amc(a
sister company with the same phone number)who has
added in escrow with our mortgage payment and
informs us that our payment will be going up every
6 months. our payment is up $300.00, has anyone
had this type of experience and tell me what we
can do about it?
From: The big picture
2006-01-24 00:00:00
are we missing the big picture here? correct me if
i'm worng, but does ameriquest not specialize in
providing loans to individuals with subprime
credit? yes. they are giving these individuals a
second, third and possibly fourth chance to live
the american dream by becoming a homeowner.
granted, the homeowners credit may not be perfect
but they are giving them some hope and a chance to
change that around. try asking wells fargo,
lasalle, chase for a loan.... nope, not gooing to
happen. why? because they look down on people with
bad credit. now, considering who they are lending
to, again homeowners with subprime credit,
inflated rates, minor fees, etc. should be the
last thing the homeowner should be worried about.
they are not stealing from innocent people. these
"innocent" people got themselves in the situation
that the are in on their own doing, not because
ameriquest pushed them. they were in that
situation before ameriquest came along. if these
people were so "trusting", then they wouldn't have
to go thru ameriquest for a home loan. something
to think about before the next time you decide to
lash out.
From: Robert Vogel
2004-11-08 13:24:35
i'm an attorney getting ready to file a lawsuit
against ameriquest in new jersey for failure to
waive pre-payment penalties on a consumer
mortgage. interested parties, please send email
to : rvogel@wmbac.com
From: inside info
2004-10-06 03:02:56
i know first hand how some folks at ameriquest do
business, and when i went through the proper
channels to report it..i got fired for some
nonsense. i have a ton of info...this company
disgusts me.
From: PH in New Jersey
2004-04-30 17:39:03
ameriquest needs to be shut down. they are the
enron to home owners!
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