Contact your local members of Congress and Rep. Ney and tell them to say NO to the Responsible Lending Act.
When Congress reconvenes at the beginning of next year, U.S. Representative Bob Ney (R-Ohio, 18th District), a senior member of the House Financial Services Committee, plans to introduce a discussion draft of a bill entitled the Responsible Lending Act. On its face, this bill would seem to be pro-consumer as it strengthens current Federal anti-predatory lending provisions by, among other things, lowering the current interest rate ceiling -- which defines a high-interest mortgage loan of 10%, to 8% above comparable-term Treasury security yields and requires lenders to clearly disclose that a mortgage has a balloon payment or negative amortization. The bill would also forbid lenders from adding oppressive and unconscionable clauses that require the borrower to forgo their rights in court and submit to arbitration whenever a legal dispute arises between the borrower and lender.
Sounds great, right? Sounds like Congress is finally putting predatory lenders on notice that they cannot push helpless consumers around anymore, right? Not really. Heres the real kicker: if this bill, as it is currently written, were passed into law, it would preempt all current state and local laws regarding predatory lending. What this means is that the tough, broad-reaching, anti-predatory lending laws -- which have been enacted in states like California, North Carolina and New York, and in municipalities like Oakland, CA -- would be overruled by this bill. This would actually be a victory for predatory lenders and servicers because Rep. Neys bill only covers consumer credit transactions which are secured by a mortgage on the borrowers residence (i.e., home equity loans and lines of credit); not standard residential mortgage transactions, which are covered by the broader and tougher state and local anti-predatory lending laws, and a favorite medium of predatory lenders. The bill would also limit the amount of damages that can be awarded in successful class-action suits by borrowers and would also represent a victory for assignees or purchasers of the high-interest mortgage loans (i.e., the secondary markets and mortgage servicers) as it creates several loopholes to help these companies avoid liability. Pretty clever, eh? Legislation that really benefits the mortgage industry is disguised in the cloak of consumer protection.
Rep. Neys Federal Election Commission records makes clear who bought and paid for this legislation. In the past few years, Rep. Ney has received campaign contributions from organizations such as: the American Bankers Association, Advanta, Americas Community Bankers Association, American Financial Services Association, American General Finance, the Appraisers Institute, Arthur Andersen, Associated Credit Bureaus, Bank of America, Bank One, CitiGroup (whose mortgage lending arm settled with the FTC just a few months ago over alleged predatory lending practices), CNAFinancial, Countrywide Credit Industries, CSFB Corp., Enron Corp., Equifax, First American Financial, FirstPlus Financial Group, Household International (who just settled with the FTC and several state attorneys general over allegations of predatory lending), Huntington Bankshares, Inc., J.P. Morgan Chase & Co., KeyCorp, Manufactured Housing Institute, MBNA Corp., Morgan Stanley, Mortgage Bankers Association of America (contributed $4,000 to Rep. Ney in the past 2 years), National Association of Mortgage Brokers (contributed $13,000 in the past 2 years), National Association of Realtors, Ohio Association of Mortgage Bankers, Ohio Bankers Association, Sallie Mae, Suntrust Bank, Washington Mutual (owner of alleged predatory lender Homeside Lending) and Wells Fargo.
I urge everyone to contact your local members of Congress and Rep. Ney and voice your opposition to this bill. Tell them this country needs meaningful laws regarding predatory lending, not legislation bought and paid for by special interest groups.
Westbury, New York
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