How do you bag a predatory lender? Give him a license that can be revoked for bad behavior? Clean up his messes with state-funded loans? Sue the shit out of him?
There were advocates for each of those approaches at state Sen. Jim Ferlo's anti-predatory-lending showcase, held April 1 in the City-County Building. The event followed the March 16 release of a state Department of Banking report showing a 14 percent rise in sheriff's sales statewide, and a 50 percent jump in foreclosures in Allegheny County from 2000 to 2003. The report has spurred interest in stopping lending practices that often lead to foreclosure. But, as Ferlo put it, "Part of the harsh reality is what's going to be palatable politically."
State Banking Secretary William Schenck said he'll soon force individual mortgage brokers and lenders to get licenses, which can be revoked if they break lending rules. (Currently, companies are licensed, but individuals are not.) He'll also limit lenders' rights to charge penalties when people try to pay off their loans early. Ferlo's writing legislation to make those changes permanent.
"The banking secretary's proposal is woefully inadequate for people facing foreclosure in the next few years," says Paul Lodico, coordinator of the Mon Valley Unemployed Committee. He wants the state to refinance unfair mortgages that go into foreclosure, replacing them with low-interest loans.
Maryellen Hayden, head organizer of the Pittsburgh branch of the Association of Community Organizations for Reform Now, says Schenck's proposal is a start. But ACORN's pushing legislation introduced in July that would ban outsized "balloon payments," expensive forms of credit insurance, and kickbacks from lenders to brokers. It would also bar lenders from making loans that eat up more than half the borrower's income. And if lenders broke the rules, borrowers could sue them and the companies that buy such loans, potentially winning punitive damages. Sponsored by Sen. Jane Orie, a McCandless Republican, that legislation didn't move last year, and has yet to be reintroduced this year. Orie's staff says she's in talks with Schenck on a united effort.
"We're not going to get everything we want out of a Republican legislature," says Greg Simmons, manager of the Pittsburgh Community Reinvestment Group's anti-predatory-lending program. He's backing Schenck's approach, noting that lenders will probably fiercely oppose even modest new regulations. "I really hope [legislators] have the courage to not take the industry line, and to do the right thing," he says.
Would-be reformers face another challenge: Congressmen Paul Kanjorski of Wilkes Barre and Robert Ney of Ohio have introduced legislation that would bar states from writing mortgage rules, but leave them with the responsibility to enforce mortgage rules written in Washington. That's got Schenck scratching his head. "How would that be done?" he asks, adding that he'll oppose legislation that restricts the state's power to protect consumers.