- The Washington Times - Tuesday, March 7, 2006

A Montgomery County judge yesterday stopped a new predatory-lending law from going into effect until a lawsuit over the legislation is heard this summer.

The Circuit Court will hear the case, filed by the American Financial Services Association and other mortgage lenders, on July 6.

Mortgage lenders argue that the federal government and the state, not county governments, can regulate mortgage lending. Proponents of the law defend its legality on the basis of a civil rights exception that allows the county to intervene in discriminatory-housing matters.

The federal Office of Thrift Supervision yesterday challenged the county law. John Bowman, chief counsel for the agency that regulates federally chartered banks and other lenders, said federal law pre-empts local lending laws.

In the weeks leading up to the law’s implementation, at least 50 lenders, including several Wall Street firms, limited or ceased their mortgage business in the county because they say the law — which cites “abusive prepayment penalties” and “excessive points and fees” as two indicators of discriminatory lending against protected classes of individuals — is written too broadly.

The law increases the maximum fine per violation from $5,000 to $500,000.

“It’s good news for borrowers in Montgomery County — at the same time, this is a first step in the process. We will pursue our litigation vigorously because we believe that the state law is pretty clear,” said American Financial Services Association spokeswoman Lynne Strang.

“The case is not over,” said Clifford Royalty, the Montgomery County attorney in charge of the government’s case. “The plaintiffs are completely mischaracterizing the law. They’re characterizing it as a law that regulates lending practices as such, which it is not. It is a law that prohibits lending discrimination.”

Unless the County Council, which approved the bill in November by a 7-2 vote, revises or repeals the ordinance, the case will go to trial, Mr. Royalty added.

Most of the lenders that limited or ceased their mortgage lending business in the county are expected to return until the July hearing.

National City Mortgage Co., which previously suspended third-party lending as a result of the law, said yesterday it will offer retail lending as well as third-party lending.

“We are pleased that the court will provide time for the matter to be more permanently resolved without disrupting the availability of credit in Montgomery County,” spokesman Chris Kemper said.

One of the County Council members who voted against the law, Republican Howard Denis, said he plans to introduce a resolution next week to repeal the legislation.

“I certainly think, in light of what has happened, it may be that some of my colleagues will take a different view on this,” said Mr. Denis, who represents Bethesda, Chevy Chase and Potomac. “Why in the world should our taxpayers be defending a lawsuit of a bill that is keeping people from buying homes?”

Mr. Denis acknowledged the seemingly wide vote margin, but said there was “a shot at repeal. Small numbers loom large in this legislative body.”

County Executive Douglas M. Duncan, a Democrat running for governor, said yesterday: “I respect the court’s ruling issued today regarding implementation of our predatory lending law. In passing this statute, the County Council sought to give our human rights office another tool in the fight against discrimination and we remain committed to this important goal.”

He added: “We will fully comply with the court’s ruling.”

Calls to the bill’s sponsors were not returned yesterday.

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