Study Praises State Lending Laws
|February 24, 2006|
|The Best Value in the Subprime Market State Predatory Lending Reforms [pdf]|
State laws passed to prevent predatory lending are working and have reduced abusive loans without stopping the flow of credit, according to a study released on Thursday by the Center for Responsible Lending. The study was based on examining more than 6 million subprime mortgages from 1998 through 2004. The researchers found that states with the strongest laws -- Massachusetts, New Jersey, New Mexico, New York, North Carolina and West Virginia -- showed the largest declines in loans with predatory terms. In many of the 28 states that have passed some kind of reforms against predatory lending, the number of predatory loans dropped by almost a third.
The research also found that these laws did not decrease the number of loans available and did not raise the interest rates for subprime loans. For example, interest rates on fixed-rate mortgages showed no statistically significant differences in eight states and were lower in 19 states.
"This study demonstrates that critics who claim anti-predatory lending laws will dry up people's access to credit are just plain wrong,” said Iowa Attorney General Tom Miller. “Consumers would be harmed if federal law preempted state regulation,” he added.
Source: Center for Responsible Lending