Jim Bernstein wrote: When I was Commissioner of the Minnesota Dept. of Commerce in the Ventura Administration (the state agency charged with regulating mortgage and other lenders) I talked about predatory lending at dozens of meetings and hearings throughout the state. I usually started out with the sentence: "Predatory lending in Minnesota is legal!" It was then and to some degree still is!
It's not as virulent as it was several years ago thanks to the multi-state action spearheaded by the Ventura Administration and Attorney General Mike Hatch which lead to stiff civil penalties levied against Household Finance - the mother of all predatory lenders. In part because of that action and the potential for additional civil penalties and damages, Household and many other sub-prime market lenders changed their business practices to make predatory lending less common, but not obsolete! One of the many tragedies associated with predatory lending is that the borrower CANNOT just "break the contract" as simply as Mr. Anderson suggests. The lender usually has the requisite documents signed and dated by the borrower(s) and simply points to those documents and says "see, they signed the papers!" And, the stakes are huge! A mortgage loan is nearly always secured by the property being purchased. And nearly always in the sub-prime market, that property is also the primary residence of the borrower. When a borrower "breaks the contract" in a mortgage loan, that gives the seller the ability to obtain the property through foreclosure. Most of the time, we saw victims of predatory loans struggling to make the payments - sometimes tricked into re-financing one predatory loan with another - in order to stay in the house! The alternative for many in the sub-prime market is homelessness along with the loss of whatever equity they had built up! <snip> What turns the interest rate alone into a predatory loan is when the borrower is told one rate and it turns out to be higher, or the borrower is assured that it will be within a range but that the loan will be at the low end of that range (it never is), or if the quoted rate is dependent upon other or variables or conditions which may be either onerous or impossible to meet. We did - and still do - need laws to outlaw predatory lending practices and schemes. Minneapolis and St. Paul continue to be ground zero for predatory lending in Minnesota. Mark Anderson replies: I'm not an expert on banking, so I'll take your word for it that there is a lot of deceptive lending going on out there. But I didn't see anything in your posting that showed why we shouldn't be using the commercial laws that already exist. As I said in my earlier comments, it makes sense for the state to define lending fraud as well as damages, so that it is easier to prosecute lenders. A statute could reasonably define fraud to include lack of disclosure of key facets of the agreement on the first page in large print. It could define damages in such a way so that the borrower has a chance to get a new loan before being required to pay off the fraudulent one. Those definitions should take care of the issues you discussed. It just complicates the law and makes compliance more difficult when we write whole new laws every time we see some scofflaws out there doing nasty things. Define and enforce what we have first. One of the problems I have with the whole "predatory lending" thing is just nomenclature. With that name, one gets the misleading picture of a lender leaping on a borrower and forcing him/her to sign the papers. It makes me think of those on the loony left who believe that any voluntary transactions between a corporation and an individual are somehow "predatory" on the part of the corporation. What really happens is both sides happily sign the papers, but one side is cheating the other through their greater knowledge of the law. Why not just call it "fraudulent lending"? Everyone would be against that. Then it's just a matter of defining what constitutes fraud. Mark V Anderson Bancroft REMINDERS: 1. Be civil! Please read the NEW RULES at http://www.e-democracy.org/rules. If you think a member is in violation, contact the list manager at [EMAIL PROTECTED] before continuing it on the list. 2. Don't feed the troll! Ignore obvious flame-bait. For state and national discussions see: http://e-democracy.org/discuss.html For external forums, see: http://e-democracy.org/mninteract ________________________________ Minneapolis Issues Forum - A Civil City-focused Civic Discussion - Mn E-Democracy Post messages to: mailto:[email protected] Subscribe, Un-subscribe, etc. at: http://e-democracy.org/mpls
