LANSING – State Representative Barb Byrum (D-Onondaga) today unveiled the Michigan Home Loan Protection Act, a comprehensive legislative package that cracks down on predatory mortgage-lending practices and strengthens consumer protections in the face of the collapsing subprime mortgage market.
"Predatory home loans jeopardize entire communities and threaten Michigan's ability to get its economy back on track," Byrum said. "We must protect our consumers. This legislation will safeguard homeowners from reckless and unscrupulous lending practices that lead to foreclosures and put working families out on the street."
The Michigan Home Loan Protection Act will:
- Ban predatory lending practices, such as making loans without requiring borrowers to prove their ability to repay the loan, encouraging borrowers to default, charging excessive late fees and charging fees for a payoff statement.
- Protect homeowners' equity by prohibiting home refinancing to generate fees for the lender unless there is a tangible net benefit to the borrower.
- Protect consumers from being steered toward high-cost loans when they would otherwise qualify for a traditional loan.
- Prohibit the financing of any points and fees that hide the true costs of the loan.
- Prohibit prepayment penalties.
- Require vulnerable borrowers to receive independent counseling from a certified third-party, non-profit counselor.
- Give injured and aggrieved homeowners legal recourse so they can independently enforce these consumer protections against unscrupulous lenders.
According to the latest figures from RealtyTrac, an Irvine, Calif.-based online foreclosure firm,Michigan ranks third in the nation in foreclosures, with 13,979 foreclosure filings in July, up 39 percent from June and up 130 percent from July 2006.
The North Carolina-based Center for Responsible Lending found that, in general, lower-income families tend to pay more for the exact same consumer product than families with higher incomes. According to the Brookings Institution, if those lower-income families could pay less for their mortgages and reduce their cost of living by just 1 percent, it would add up to billions of dollars in new spending power for these families. This would enable lower- and modest-income families to save for, and invest in, income-growing assets such as homes and retirement savings. It would also allow them to pay for critical expenses for their children, such as education and health care.
"Michigan has one of the highest foreclosure rates in the country," Byrum said. "Every day, we hear more and more about the demise of the subprime mortgage market and the negative effect it's having on the economy both here in Michigan and across the nation. We cannot allow reckless lenders to hurt our communities by causing working families to abandon their homes, which lowers property values throughout our neighborhoods."