Georgia rewires anti-predatory lending law
March 10, 2003
Gov. Perdue to sign bill reducing liability for holders of mortgage-backed securities
Inman News Features
After weeks of debate, lenders are close to a knockout of Georgia's anti-predatory lending law, which was the toughest around for months.
Georgia Gov. Sonny Perdue today said he plans to sign a predatory lending bill this afternoon that essentially rewrites the Georgia Fair Lending Act. The new legislation will eliminate most of the liability for all parties in the mortgage financing chain, except the original lender, news sources said.
Predatory lenders use unethical, illegal or unduly aggressive tactics to sell mortgage and home equity loans with inflated interest rates and fees to minorities, the poor and people with substandard credit.
The Georgia Fair Lending Act was enacted in October 2002, and in January Standard & Poor's announced it no longer would rate mortgage-backed securities subject to the law because it included an assignee liability clause that permitted homeowners allegedly hurt by predatory lending practices to sue their lender or whoever purchased their loan, including holders of mortgage-backed securities.
S&P's decision triggered a flood of anti-GFLA sentiment from the financial industry, which argued that no one would buy Georgia loans and lending would evaporate in the state.
Mortgage lender Countrywide ceased writing subprime loans in the state, and mortgage purchase giants Fannie Mae and Freddie Mac also reportedly stopped purchasing home loans protected by GFLA, news sources said.
The Georgia Fair Lending Act was based in part on model legislation drafted by AARP, which took an interest in the issue because 80 percent of seniors own their own homes and equity-rich elderly homeowners can be a preferred target for unethical lenders.
Kathy Floyd, advocacy director with AARP Georgia, released a statement in response to the governor's decision, saying today's bill is the "culmination of a seven-week misinformation campaign against Georgia consumers."
Despite the group's opposition to the latest bill, Floyd said it will continue to work with Lt. Gov. Mark Taylor, state senators and members of the House and others to protect its 850,000 members from financial exploitation.
Copyright: Inman News Service