- The Washington Times - Tuesday, October 3, 2000

An outgoing District of Columbia council member is trying to push through emergency legislation to rewrite 99-year-old foreclosure laws and clamp down on "predatory" lending.

Council member Charlene Drew Jarvis, Ward 4 Democrat and chairman of the Committee on Economic Development, during a hearing yesterday heard from a long line of consumer advocates, mortgage bankers and lawyers on abusive lending practices and what level of regulation is needed.

The proposed legislation, drawn up by a task force headed by the D.C. Office of Banking and Financial Institutions, aims to define and disallow certain types of lending practices. The bill would also strengthen the review process for foreclosures. Its emergency status speeds up its time line for possible approval.

Mrs. Jarvis, a 21-year council veteran, was defeated for renomination last month and will leave office at the end of the year.

The legislation's authors patterned it in part after a North Carolina law that bans some kinds of lending practices outright. The matter has gained attention in the past year as a series of federal agencies released reports decrying the rising tide of predatory lending practices.

D.C. regulators and consumer groups feel the matter may be best addressed on the local level.

"Federal legislation is not adequate, and regulators will not do anything that's as all-encompassing as what this bill does," said Patricia Sturdevant, executive director and general counsel of the National Association of Consumer Advocates.

The bill identifies 11 practices that can be predatory, including:

• Insufficient repayment ability on the part of the borrower.

• Single-premium credit insurance.

• "Flipping" or repeated refinancing of a loan.

• Lender encouraging default by borrower.

• Unusual and unconscionable charges.

The legislation is somewhat back-ended, however: Before a lender forecloses on a borrower's home, a judicial review will occur. If any of the 11 flagged practices are spotted, the borrower may have the option to keep their home on a reduced-payment plan.

Consumer advocates outlined the need for such a law, based on what they call discriminatory and fraudulent practices. They highlighted subprime loans, which carry high interest rates, as opposed to prime loans, which are designed for borrowers with strong credit histories.

James Sugarman, staff lawyer for the Legal Counsel for the Elderly, under the AARP Foundation, represents borrowers who have lost their homes. They have sued lenders, accusing them of predatory practices.

Mr. Sugarman brought with him a client whose home he was attempting to save after foreclosure.

Typical of these situations, "the person didn't get into our office in time, the house was foreclosed, and we lost significant rights to defend," he said.

Under the bill, Mr. Sugarman might be able to defend someone's home before foreclosure, which he said would be an easier process.

Ms. Sturdevant said the legislation does not go far enough, because, for example, it does not ban balloon payments those that rise at the end of the loan. The bill's authors said balloon payments are not inherently abusive and can be helpful in some cases.

In contrast, representatives of the Mortgage Bankers Association of Metropolitan Washington were on hand to ensure the legislation does not go too far by discouraging subprime lending, which they said could be a boon to borrowers with bad credit histories.

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