Congress Considers Stripping Homeowners of State Protections

TPM Cafe
Dec. 04, 2005

The Center for Responsible Lending (CRL) is reporting that a new bill in Congress would override and weaken state anti-predatory lending laws that protect homeowners. Congressmen Ney (R-Ohio) and Kanjorski (D-Pennsylvania) have introduced legislation that would roll back state protections for homeowners.

Promoting uniformity among the states is a good reason to introduce federal legislation. Such legislation can ensure that states don't "race to the bottom."

But the Ney-Kanjorski bill pins states to the bottom. Forcing all states to the lowest common denominator smacks of blatant interest group pandering.

According to the CRL analysis, there are several key problems with the Ney-Kanjorski bill:

First, the bill excludes certain fees from the calculations that trigger predatory lending protections. So lenders can escape those protections by shifting their fees into those exlcuded categories. Second, the bill allows abusive flipping of home loans, rather than prohibiting abusive flipping on all home loans. Third, the bill lets lenders finance their own high fees, so homeowners end up paying for fees as part of their mortgage. With no up front payment, the fees easily become hidden away so that borrowers never realize the significance of those hidden exhorbitant fees. The CRL website details other problems with the bill.

In short, the Ney-Kanjorski bill lets lenders take advantage of new homeowners, especially sub-prime borrowers. So much for the ownership society.

In response to the Ney-Kanjorski bill, Representatives Miller (D-NC), Watt (D-NC), and Frank (D-MA) have introduced a bill that would strengthen nationwide protections while letting states keep strong laws that protect homeowners. Officials from New York, Illinois, South Carolina, and Arkansas joined the warning against the Ney-Kanjorski bill.

Representative Ney may not be able to give his full attention to this brewing legislative battle. As the Washington Post put it: "Prosecutors have already told...Ney, and his former chief of staff that they are preparing a possible bribery case against them..."

While he's explaining his interest in Abramoff's deal to buy a fleet of Florida gambling boats, I hope he also has time to explain why he's stripping homeowners of their state law protections.