- The Washington Times - Wednesday, January 9, 2002

D.C. Council members Linda W. Cropp and Sharon Ambrose yesterday introduced a bill to curb so-called "predatory lending" practices. The measure comes two months after lawmakers suspended year-old legislation because its tough language scared away mortgage lenders.
"The intent of this bill is to create a clear and easily understood mechanism that will provide maximum protection for consumers, while also minimizing the additional regulatory burden placed upon the District of Columbia government and the city's reputable lenders and brokers," said Mrs. Cropp, at-large Democrat.
Critics say mortgage lenders target elderly people or minority groups through deceptive tactics called "predatory lending." Directed at people seeking to refinance or make improvements to their home, predatory lending focuses on subprime borrowers, or people with troubled credit histories who qualify only for higher-cost loans.
Rising concern over the practice has prompted federal and local governments to crack down.
The District passed a law meant to curb predatory lending in late 2000. It went into effect Sept. 1, but major lenders pulled out of the market, prompting D.C. lawmakers to vote for a suspension of the bill.
Among the practices banned in the bill are loans to borrowers with insufficient ability to repay; "flipping," or repeated refinancing; credit insurance financed up-front in a loan, unless approved by the mayor; "unusual and unconscionable" charges; and bigger loans than the borrower could qualify for based on credit scores.
Hearings on the amended law will be held Jan. 22. Meanwhile, consumer advocates say the new law is too weak.
"This bill doesn't go far enough," said Mimi Castaldi, D.C. State director for AARP. "Our goal is for it to cover as many people with high-cost loans as possible. But the way the law is written, it sets a ceiling so high that very few loans will be covered."
It was easier for a loan to fall under regulation under the old law, which sets the standard at refinancings above $275,000 and includes loans made or backed by federally chartered institutions Fannie Mae and Freddie Mac.
Under the legislation proposed yesterday, fewer loans will be covered. Such loans must have a trigger rate, or one that exceeds the interest rate on U.S. Treasury securities by 7 percent. Another trigger is additional points or fees.
Under both versions, the bill exempts refinancings that meet Fannie Mae and Freddie Mac underwriting standards. Neither company originates loans or refinancing, but rather buys loans from banks and other lenders so those lenders can make new loans.
Wright Andrews, a partner at Butera & Andrews, representing the Responsible Mortgage Lenders Coalition, a group of major nonprime lenders such as CountryWide and OptionOne, said the proposed changes are "reasonable and workable."
But he said the distinction made between federally insured institutions and other lenders is unfair.
"Many of the better, more responsible companies will have to compete, having much greater restrictions with institutions that would be required to comply only with the federal law," Mr. Andrews said.

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