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View Diary: Anti-predatory lending bill moving fast (20 comments)

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  •  The Bill (0+ / 0-)

    Has its heart in the right place, but is drafted to attack practices which frankly were being pulled back by the worst offenders 5 years ago, like forced placed insurance.  It also lacks sufficient definitions of key concepts, like "net tangible benefit".  What does that mean? In most re-fis, the consumer walks out with cash.  Of course, in some of the deals I've seen the consumer gets $10K and the broker gets $20K, but it's still technically a "tangible benefit" if the homeowner needed the cash.  How about if the loan needed to be refinanced because it was late (but not yet in default?).  

    And the real issues of the past five years -- like HUD's 1999 letter basically allowing brokers and lenders to obfuscate the payment of yield spread premiums which the borrower pays for in terms of an increased interest rate; flat-level prepayment penalties that remain the same whether a loan is paid off on day 2 or day 629 after a lender has made his "minimum interest" threshold; and infinite predatory servicing practices such as suspensing partial payments and refusing to engage in good faith efforts at forbearance and workout (which is driving a lot of the current foreclosures; most lenders that do predatory lending are exempt from FNMA requirements to engage in meaningful loss mitigation) -- are barely touched.

    I'm a big supporter of the National Reinvestment Coalition and their work and certainly their local chapters have been out on the forefront of this fight.  But this bill allows a lot of smoke and mirrors by using legalese that the courts will have to sort out for decades in litigation rather than simply prohibiting the most egregious practices and shifting the burdens of proof back to the most sophisticated parties in the transaction - the lenders and brokers.

    •  This bill is a great bill (0+ / 0-)

      it fixes the problems.

      I can truly say I'm impressed by the scope and effectiveness of the law's provisions.


      •  I do think the diarist has (0+ / 0-)

        a point that state protections should not be overridden.

        Federal laws regulating lending should never be preemptive of state law.

        Lenders should be required to meet both state and federal laws just like ordinary people.

        •  The first comment to the diary (0+ / 0-)

          was provoked by the distress caused by a federal override [12 United States Code 85] of state laws.

          The law 12 U.S.C. 85 [the Delaware and South Dakota credit card company ripoff enabling act] needs to be repealed and rewritten.

    •  The fees should probably be capped (0+ / 0-)

      to prevent the $10,000/$20,000 problem.

      `(I) in the case of a loan for $20,000 or more, 5 percent of the total loan amount; or

      `(II) in the case of a loan for less than $20,000, the lesser of 8 percent of the total loan amount or $1,000

      A great bill can still be improved.

    •  Forcing the yield spread premium (0+ / 0-)

      into the calculation of what constitutes a "high cost loan" is ceertainly a big improvement over the current situation. On a practical level, lenders are reluctant to make high cost loans, so they'll be very wary of the excessive yield spread premiums, because they will make the loan a high cost loan. It would be nice to outlaw YSPs altogether, but it is a tough legislative sell.

      "The more they spoke of honor, the more I checked my wallet."

      by bankbane on Thu Nov 08, 2007 at 08:33:42 AM PST

      [ Parent ]

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