June 20th, 2008
Tough Sell For Home Lending Limits
Democratic lawmakers hoping to prevent another foreclosure crisis have approved a series of homeowner-friendly bills in the Assembly, but those measures face tougher prospects as they head to a key Senate committee today.
Resistance is strong from moderate Democrats in the upper house, who tend to be more supportive of business interests than their Assembly counterparts, and Republicans, who dislike the notion of regulation. Opposition also is vigorous from the high-powered California Mortgage Association, which has spent as much as $100,000 this legislative session to convince lawmakers that the measures will backfire on homeowners.
Paul Leonard, the director of the Center for Responsible Lending in Oakland, acknowledged the Assembly measures will be a tough sell in the Senate.
“Both the Senate analysis, as well as the industry opposition, has really ramped up, and it appears to be very hostile territory that seems to be set on preventing the real reforms that are needed in the marketplace,” Leonard said.
But Stanley Tseng, president of the Silicon Valley chapter of the California Association of Mortgage Brokers, said, “The intention of legislators is all good - there’s no doubt they want to prevent abuse and predatory lending practices that have happened in the past. However, this could have unintended consequences.”
For example, he said, stated-income loans - in which borrowers provide little or no documentation to prove their income - were originally designed to allow self-employed people and small-business owners to apply for loans without having to provide years of personal and business tax returns. In exchange for the convenience, borrowers paid a higher interest rate.
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