New law targets predatory lenders
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posted by Bob at Wednesday, May 16, 2007
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Wednesday, May 16, 2007
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11 Comments:
New law targets predatory lenders
Anyone who helps commit mortgage fraud commits a felony punishable with up to two years in prison
BY JENNIFER BJORHUS
Pioneer Press
Article Last Updated: 05/15/2007 11:09:11 PM CDT
Residential mortgage fraud is now its own felony in Minnesota. A law signed by Gov. Tim Pawlenty Monday night caps a trio of new laws this spring aimed at protecting Minnesotans against reckless home mortgage lending.
The regulatory crackdown comes as the Twin Cities area suffers a serious wave of home foreclosures, many blamed on widespread mortgage fraud during the housing boom. So far this year, more than 3,000 homes in the seven-county metro area have been auctioned off in sheriff's sales, according to Pioneer Press records. That's more foreclosures than in all of 2002, 2003 or 2004, and the problem shows no signs of abating soon.
Under the latest change, anyone who helps commit mortgage fraud, defined as knowingly misrepresenting or omitting important information in the lending process, commits a felony punishable with up to two years in prison. Violators also must pay restitution to their victims.
In the past, mortgage fraud in Minnesota was handled under other statutes, such as mail fraud, money laundering or theft by swindle, which were more difficult for prosecutors to use.
Victims of dishonest mortgage lending or inflated home appraisals also will have the right to sue violators for damages and other costs - something that was nearly impossible in the past, consumer protection experts say.
"This provides serious consequences to the predatory practices that we've seen," said Sen. Linda Higgins, DFL-Minneapolis and Senate author of the bill. "We now have the strongest predatory lending laws in the country."
The new law, which goes into effect Aug. 1, also bans prepayment penalties and requires homeowners with nonstandard loans made through organizations such as Habitat for Humanity to get financial counseling before refinancing.
A second bill signed into law last week establishes new state Commerce Department requirements for becoming a mortgage broker in Minnesota. The bill stops short of requiring individual licensing of mortgage brokers, but it requires applicants to have a minimum net worth of $250,000, or a surety bond of $50,000. It also requires 15 hours of approved training.
In mid-April, Pawlenty signed a far-reaching consumer-protection bill based on proposals by Attorney General Lori Swanson that cracks down on lending by the state's non-bank mortgage brokers and lenders. That new law essentially boots the use of "no doc" loans, requiring mortgage brokers and originators to actually verify that a borrower can repay a loan.
The law also caps fees that can be charged to 5 percent of the total loan value, largely bans negative-amortization loans that allow owners to pay super-low monthly payments that add to the overall size of their mortgage, and reigns in adjustable-rate mortgages by requiring borrowers to qualify for the loan at the higher, fully indexed interest rate that kicks in after the low introductory rate expires.
Jennifer Bjorhus can be reached at jbjorhus@pioneerpress.com or 651-228-2146.
It's probably 5 years too late. Most of the damage has already been done.
I wonder what laws they will change and how long it will take to do so after the City of St. Paul loses the lawsuit and is knee deep in judgements.
Santa isn't coming boy's!
News Flash- for the safety of the residence of Saint Paul, tin foil will no longer be sold in local retail outlets.
St.Paul has turned into one big disaster area, maybe someone should call in the Red Cross for relief help! The city has gone to hell, Magner and the bulldozers have been set loose, now the city gets what they deserve vacant buildings, lack of colletable taxes, homeless families, higher crime and law suits.
What do you mean by "Santa is not coming?" He has already been here, the city has been so distracted with petty issues that they just don't know it yet!
Thanks a lot Governor! I have a "No Doc" Mortgage which I have had no trouble paying, but now thanks to all the help you want to give me I am not going to be able to refi it when it comes due. Can I move in with you Governor when they forclose my home because I can't refi? What about my lost equity, is there a state program to replace that for me?
Wow, I actually get to agree with someone here. I too am concerned that the bill may be so restrictive that it makes it to hard for low and moderate income people to buy homes.
The state is assuming that people didn't know what they were getting into when they took out the mortgages with interest rates that go up after time. I'm guessing that most people knew what they were doing, thought that their finances would get better over time and for some it didn't work out. The unfortunate thing with the new restrictions is that a lot of people will not be able to get financed who might have been able to make the payments.
JMONTOMEPPOF
Chuck Repke
Of ocurse they knew what they were doing. This law just makes more victims out of the people they pretend to want to help, just like the people who lose their jobs due to the smoking ban, just like the people who lose their homes due to over reaching code enforcement, just like all the women that continue to get hurt even though they have bigger and better Domestic Violence laws, and on and on and on....all in the name of Saftey and helping peole, yet more and more people just keep getting screwed over while the government sits in an ivory tower without a clue!
I also agree that the new law could have an effect on people that are responsible enough to make their mortgage payments yet they will not qaulify due to some flaws on their credits reports and/or the income requirements.
I refinanced my property a year ago to build a home and was offered a very low interest rate that wasn't fixed, I of course did not go for the offer and went for the fixed mortgage knowing that common sense will tell you that interest rates would be going back up and then I would not be sure what my monthly payment would end up being.
The mortgage co. explained all the risks that were involved with not having the fixed rate, so I feel people took the chance knowing what the risks are.
I am thankful that I did my refinance when I did, I'm guessing with the new regulations and law theres a good chance that I would of been denied financing.
Nancy
I wonder if Magner had a sideline refi business going?
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