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Swanson, a first-term Democrat, said Thursday she’d ask the Legislature to adopt an eight-point plan to guard against so-called predatory lending. She said the growing number of home foreclosures and loan defaults convinces her that tighter lending regulations are needed.
“Legislation alone can’t solve the problem,” Swanson said. “But self regulation has clearly failed in this industry.”
Many of the requirements would force lenders to provide more useful information to borrowers upfront and take steps to make sure loans fit a buyer’s financial means.
There’s also the possibility of two years in prison and $75,000 in fines — greater penalties if the victim is disabled or elderly — for people who provide grossly unsuitable loans. That includes falsifying loan applications to make a borrower’s income, assets and debts appear more favorable or extending a mortgage to someone who clearly lacks the capacity to repay it.
Consumers would get more power to sue to recover losses, and a ban on loan prepayment penalties that was scrubbed from Minnesota’s books in 1996 would be reinstated.
Prentiss Cox, a University of Minnesota law professor who led a task force on predatory lending, said he expects reputable mortgage lenders to rally behind the proposals because they go after the companies and people stretching the rules.
“It’s surprisingly common sense,” he said.
Pat Martyn, executive director of the Minnesota Association of Mortgage Brokers, said the 600-entity group shares Swanson’s goal of going after unscrupulous players in the mortgage industry.
“If Minnesotans lost faith in the credibility of a real estate transaction in general it would be very detrimental to the industry,” Martyn said. “So we have to be vigilant to make sure it’s above reproach and it’s conducted appropriately and well within the law.”
Martyn said his group is anxious to see more details and wants to make sure the steps don’t make loans too hard for people to access.
Carolyn wrote on Jan 19, 2007 1:16 PM: