Wednesday, December 28, 2005

Gutted Bank Lending Standards Coming Soon To A Town Near You

Thank God bank-owned Republicans and Democrats are willing to shill for the banking and credit lending industries and sell out American consumers. From the LA Times:

Lenders Target State Laws
An industry that makes home loans to people with poor credit wants uniform federal rules that could undo tougher consumer protections.

By Jonathan Peterson, Times Staff Writer

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.


Consumer groups say the Ney-Kanjorski bill is a thinly veiled attempt to undo tough state regulations where they exist, and to prevent new laws from being adopted.

"If we've done a public good here, why does that standard have to be diluted?" asked Joseph A. Smith Jr., North Carolina's banking commissioner.

The national proposed standards, for example, would be more permissive than several state measures when it comes to the practice known as flipping, in which loan agents persuade borrowers to refinance after a short period, in some cases just months after they took out their existing loan.

Flipping generates new fees and commissions for lenders and loan agents and can put cash in the pockets of borrowers. But it also chips away at homeowners' equity and may saddle them with costlier terms than they expected.

The practice has been abetted by rising housing prices which enable loan salespeople to tell borrowers that they can painlessly tap the added equity in their homes. But if home prices level off or decline, some debtors could find themselves with homes that are worth less than their mortgages, and they could face a heightened risk of foreclosure.

Consumer advocates are backing a bill by Reps. Brad Miller and Melvin L. Watt, both North Carolina Democrats, and Rep. Barney Frank (D-Mass.) that would parallel the North Carolina law by including a strict ban on flipping and requiring borrowers to get counseling before signing higher-cost loans. Unlike Ney-Kanjorski, it would not prevent states from imposing stricter requirements.

The mortgage banking industry has donated nearly $2 million to lawmakers in the current election cycle, according to the Center for Responsive Politics. Ney and Kanjorski led the pack, with each reporting the same amount — $38,250 — from the industry.

Ney, who has been subpoenaed as part of a widening federal criminal probe of lobbyist Jack Abramoff, was not available for comment. Kanjorski's office did not respond to questions.

The industry is "hopeful there will be action early next year," said Wright H. Andrews Jr., a lobbyist for the lenders.

Gee, which bill do you think Congress is going to pass and the preznit is going to sign - the bill that guts tougher state laws on the credit lending industry or the bill that creates a uniform tougher federal regulation of the credit lending industry but still allows states to create tougher laws if they so chose?

Sheesh. How much money is enough money for the credit lending and banking industries?

After passing the bankruptcy bill earlier this year, the banks and credit card companies have now made it virtually impossible for individuals to declare bankruptcy and make a fresh start in life no matter how they incurred their personal debt.

Remember, not everybody gets into debt because of personal irresponsibility, as the banking/credit card industries and the politicians they own would have you believe.

Some people, through unfortunate circumstances, like job loss and/or illness, incur large amounts of debt (and fast accruing interest on that debt that often amounts to more than the original debt!) that they are now saddled with for life under the new bankruptcy guidelines.

Now the credit lending industry wants to make sure people who are credit risks have access to crazy loan schemes that will tap out the equity in their homes and increase a debt load they will be stuck with for life?

Good God, welcome to the United Banking and Credit Card States of America - a nation governed by the moneyed interests, for the moneyed interests, and of the moneyed interests.

And let's remember, shall we, that corporations can still declare bankruptcy with equanimity and drop nearly all of their debt burdens. It seems that our righteous politicians, like Mr. Ney and Mr. Kanjorski above, are very big on pushing "personal responsibility" for individuals but not so much for corporations or bank-owned politicians.

I guess when it comes to making the laws of this country, it always come down to this old maxim for the politicians: In The Almighty Dollar We Trust.

If you've got the dollars and are willing to spread 'em around, they'll make the laws for you.

Makes me proud to be an American.

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