Legislators aim to stop predatory lending
LANSING – Many Michigan legislators will be pushing new measures to register mortgage lenders and prevent predatory practices, as they grapple with the fallout of the sub-prime mortgage crisis.
"We have to make sure financial institutions are working in a manner that is consistent with the law," said Rep. David Robertson, R-Grand Blanc.
Robertson, a member of the Banking and Financial Services Committee, said multiple bills will be reviewed, with some possibly coming to a vote as early as next month.
Efforts are geared toward how to fully register lenders and wipe out unfair lending practices.
"(Michigan) is one of only about a dozen states that doesn't license our mortgage brokers," said Rep. Steve Tobocman, D-Detroit.
If the bills pass, the state's Office of Financial and Insurance Services (OFIS) could require more specific documentation on lender dealings, and possibly penalize or deny proper licensing and registration to those that refuse to pay necessary expenses or comply with inspections.
Passage of the bills would also tighten regulations on lender-borrower information disclosure to prevent the lender from misleading the borrower or giving fraudulent information. It would also ensure that lending fees and charges were reasonable, as well.
Tobocman said the one of the most important parts of the pending legislation "is to go after unscrupulous lenders in mortgage practice."
While there is ongoing debate over the fact that mortgage brokers don't receive as much review and examination as banks, some believe the new laws might not be essential.
Jim Casler, president of Pinnacle Financial Corp. in Traverse City, believes only existing laws should be enforced.
"No additional regulation is really necessary," he said.
But if the stricter examination and licensure bills do pass through the legislature, enforcement will be another issue.
Robertson said OFIS would most likely be the organization to enforce any new and current laws involving proper licensure.
OFIS currently functions to evaluate information on thousands of organizations, such as banks, credit unions, consumer finance lenders, and others.
The organization is also considering whether to increase the number of examiners who inspect the documents of mortgage brokers, which would be funded primarily by industry fees.
"That's something that's definitely needed," Tobocman said. "If we can do that in a way that doesn't impact the tax-payer, that's something we want to support."
OFIS offers assistance to consumers if they have problems with any of the institutions that are regulated by the organization.
"We have to protect the consumer," Robertson said. BN