DC Speaks: Execs Want Simplified Subprime Loan Laws
Bergquist, Erick, American Banker
Stephen W. Prough understands why Congress is so interested in predatory lending, but the chairman of Ameriquest Mortgage Co. in Orange, Calif., wants them to keep the problem in perspective.
"You really need to look at the number of transactions done on a monthly basis as a whole and measure (predatory lending) in relationship to that," Mr. Prough said in an interview Thursday. "'Predatory' is really a high-profile word with no definition."
He was among 18 witnesses scheduled to testify Thursday and today as the Senate Banking Committee holds its first hearings of the year on this topic.
Mr. Prough, who was invited because the subprime lending company's policies are considered fair and responsible, said lawmakers trying to eradicate predatory lending should focus on enforcing existing consumer protection laws, educating consumers, and simplifying the mortgage process. Congress also ought to preempt the myriad state and local anti-predator measures cropping up around the country, he said.
"I have to know what ZIP code a loan is in to determine what patchwork of laws I have to deal with," Mr. Prough said. "I have to deal with four laws -- the state, local, county, and federal."
Adam J. Bass, Ameriquest's senior executive vice president, illustrated the point by saying that Chicago, Cook County, and Illinois all have different anti-predator rules. Such varied restrictions could drive up the cost or limit the availability of credit, he said.
Ameriquest supports "measured, balanced federal legislation," but the local measures could be preempted under existing federal law, Mr. Bass said. "We think there's a body of law out there that supports the idea ... that the federal law should prevail over any state or local law."
(The American Bankers Association is preparing to ask a court to consider that question. Lenders sued over Philadelphia's anti-predator ordinance, but the Pennsylvania Legislature stepped in and reversed the ordinance, making the lawsuit moot.)
Still, Mr. Prough said federal regulators already have the power to tackle the problem. "They should be using their full enforcement powers and staffing their departments correctly so that they can really be reviewing the work of lenders and make sure they are fulfilling existing rules. …