Housing advocates oppose brokers' loan shark position

Housing advocates oppose brokers' loan shark position

The Illinois Mortgage Brokers Association issued a "position statement" this week as ammunition in the brokers' fight against what it calls excessive rulemaking aimed at curtailing predatory residential real estate lending.

Housing advocates here said they oppose virtually all of it.

The statement, distributed by the association's Glenview public relations agency, said Governor George Ryan's rules before a legislative body, the Joint Committee on Administrative Rules (JCAR), will not solve the loan shark problem because the rules "focus on programs, not practices."

Rochelle Nawrocki, Government Relations Director for Neighborhood Housing Services (NHS), a community loan source and housing advocate, said "I have no idea what that means," adding that she believes she speaks for most community groups that are fighting predatory lenders.

"We believe it focuses on practices, such as prohibiting single-premium credit life insurance deals, excessive fees, short term balloon payments and excessive pre-payment penalties, equity stripping that prohibits putting a cap on points and fees and prohibitions against loan flipping," she said of Ryan's proposals.

In addition to the litany of unscrupulous lending practices NHS wants ended, Nawrocki said, "The regulations require verification of a borrowers ability to repay a loan and end improvident lending by looking at debt to income ratios."

NHS said the proposed rules will not cause suffering among thousands of loan applicants by denying them credit, as IMBA claims.

"That's not right," Nawrocki said of the brokers' fear expressed in their position statement.

"We believe the regulations will allow legitimate lenders to continue responsible lending to creditworthy customers," she said, adding that NHS believes the predatory lending scourge has resulted in more than 5000 mortgage loan foreclosures in 1999, the last available source of data, from only 150 in 1993.

She said NHS found that the majority of Chicago's predatory loan victims are minority members.

"Clearly there needs to be lending that has to be stopped," she said.

IMBA said it fears that 70 percent of subprime loans, or deals made with risky applicants, would not be made if JCAR adopts Ryan's proposed rules, and, worse, the position statement said, "fully 20 percent of conventional loans may not be made."

NHS disagrees, saying the regulations merely define what a high cost loan is.

"If you make a high cost loan, you're subject to additional prohibitions against abusive lending practices," Nawrocki said.

"If you're a responsible subprime lender, these regulations will not have an effect on your business. A typical responsible lender charges one to two points to originate a loan, and these regulations define a high cost loan as five percent in points and fees. The governor's regulations are really a moderate approach and all sides should be able to agree," she said.

Nawrocki said she doesn't want to "lend credence" to the brokers' claim that their association has been working diligently to craft legislation that will solve the problem of unscrupulous practices.

"Last year when legislation was on the table, the industry told us they wanted to see regulations. Now they want to see legislation. I think it's a stall tactic," she said.

As for self-regulation, she said that approach hasn't worked, as evidenced by the rising numbers of mortgage loan foreclosures.

Article Copyright Sengstacke Enterprises, Inc.