From Bloomberg:
States Push Ahead With Subprime-Mortgage Laws as Congress Lags
State lawmakers, faced with a record number of constituents who may lose their homes, are pressing to pass their own laws to halt mortgage-lending abuses, saying they can’t afford to rely on the U.S. Congress to act.
Legislators in some 30 states have introduced about 85 bills to protect mortgage borrowers from deceptive-lending practices, foreclosure or fraud, according to a Bloomberg analysis of data from the National Conference of State Legislatures.
“The states are going ahead and doing what they think is in the best interest of their citizens,” said Minnesota Attorney General Lori Swanson. “Hopefully, the federal government will act, too, but the states aren’t waiting.”
The initiatives are raising the stakes in a long-running battle over who should take the lead in protecting consumers. Mortgage lenders want federal law to override state statutes, saying multiple laws interfere with their efficiency. State officials counter that they often have stronger enforcement.
Lawmakers from Illinois to Maine are proposing statutes that would bar lenders from making loans they don’t believe a borrower can repay and ban penalties for prepayment of loans. Some want to offer loans to homeowners on the verge of foreclosure. In the most extreme case, they would jail those who show a pattern of engaging in mortgage fraud.
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About 35 states already have some laws against predatory lending. The state efforts to regulate the subprime market “have been met with resistance or indifference from federal regulators and even Congress,” Smith said at a March hearing of the Senate Banking Committee.There were “few, if any, significant consumer-protection enforcement actions” by the federal government, he said.
Mortgage industry lobbyists counter that a patchwork of state rules makes it hard to operate across state lines.
The Mortgage Bankers Association, a Washington-based trade group representing such lenders as Countrywide Financial Corp. and Wells Fargo & Co., is blanketing Capitol Hill with calls for a federal law that overrides state statutes.
“For us, that’s been the price of admission, the price of support,” said Kurt Pfotenhauer, the MBA’s lead lobbyist. “That’s what brings our industry to the table with Congress.”