Magazine article American Banker

D.C. Anti-Predatory Bill 1st to Target Foreclosures

Magazine article American Banker

D.C. Anti-Predatory Bill 1st to Target Foreclosures

Article excerpt

Over objections from the banking industry, the District of Columbia's City Council has passed the nation's first bill that would let homeowners contest a foreclosure on the grounds that an initial loan was predatory.

If the court then ruled in the homeowner's favor, foreclosure proceedings would be halted and the homeowner compensated by the lender.

"The bill strikes the right balance between protecting consumers and fostering an environment of access to credit for D.C. residents," said Stephen Taylor, general counsel for the District of Columbia's office of banking and finance. "Not everyone is happy, but I think overall we did a good job and are taking a lead in the country."

Part of a legislative package to revamp the city's century-old foreclosure laws, the bill was passed by the council Tuesday. It cannot become law until it is reviewed by Congress and approved by Mayor Anthony Williams, which could happen as early as April.

Mayor Williams supports the bill, which defines predatory loans as those that charge excessive fees or are made to borrowers known to have "insufficient repayment ability." A loan made to refinance a property more than once in 18 months -- with no benefit to the homeowner -- would also be considered predatory.

In a last-minute amendment, however, the council exempted all loans that qualify for sale to Fannie Mae and Freddie Mac.

Fe Morales-Marks, vice president of the national housing impact division at Fannie Mae and a member of the task force that helped draft the bill, said the amendment would guarantee lenders selling loans to Fannie and Freddie that they would not be sued for predatory practices.

"This helps lenders that serve in this market and want to expand into the market to do so with some certainty," Ms. Morales-Marks said.

North Carolina is the only state with an anti-predatory-lending law on its books. …

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