Magazine article American Banker

North Carolina Anti-Predator Law A Good Model for Other States

Magazine article American Banker

North Carolina Anti-Predator Law A Good Model for Other States

Article excerpt

Are the rumors true? Has North Carolina's predatory lending law crippled subprime lending in the state? Is it doing even wider damage by disrupting conventional lending?

The answer to all three questions is the same: No. Those of us who operate in North Carolina's lending markets know that the law has not hurt the flow of legitimate loan capital in any way.

Enacted in 1999, it is the nation's first state legislation aimed at curbing predatory mortgage lending. It protects the equity North Carolina homeowners have invested in their homes by curbing the worst predatory practices, such as excessive fees, the financing of single-premium credit insurance, prepayment penalties that lock borrowers into bad loans, and "flipping"-- repeated refinancing that does not benefit the borrower.

The law got overwhelming bipartisan support in a state known more for its banking industry prowess than for consumer protection, and it was backed by all the major financial trade associations in the state, including those of banks, thrifts, credit unions, mortgage bankers, and mortgage brokers. These are not exactly the ingredients of a radical stew.

Now a handful of self-interested revisionists intent on blocking similar legislation in other states are spreading patently untrue "horror stories" about the supposedly adverse effect of North Carolina's law.

You can be sure that if the law were so onerous, the state's lending community would never have supported it in the first place. …

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