Lenders Target State Laws

The L.A.Times reports:

RALEIGH, N.C. — A booming industry that makes home loans to people with fragile credit is lobbying Congress for nationwide rules that regulators and consumer advocates warn would roll back tougher state protections.

The debate comes as millions of Americans have taken out loans with higher fees and interest rates than the mortgages granted to people with solid credit. As these "sub-prime" loans have proliferated, so have complaints from borrowers who say they've been slammed by surprise fees and high-pressure salespeople.


More than two dozen states, led by North Carolina, have moved into a vacuum created by weak federal regulation, imposing their own laws targeting abusive practices. The industry's five biggest players are based in California, and one, Orange-based Ameriquest Mortgage Co., is nearing a $325-million settlement with 33 states over allegations of bait-and-switch tactics, inflated appraisals and other issues.

Amid increasing scrutiny of their operations, lenders have rallied behind a bill sponsored by Reps. Bob Ney (R-Ohio) and Paul E. Kanjorski (D-Pa.) that would impose uniform national rules on the industry, which last year issued $530 billion in higher-cost mortgages.

Supporters say the measure is needed to replace a hodgepodge of state and local lending laws. Some of those laws, lenders say, make it costlier to extend credit to higher-risk borrowers. In at least one case, a lender says it cannot offer North Carolina customers the lowest possible interest rate because of restrictions in state law.

The drive for more leverage.It's become as American as apply pie.Federalism be damned.