Senators propose crackdowns on lending practices

Several pieces of federal and state legislation are under consideration in response to the national subprime mortgage meltdown.
U.S. Sen. Charles Schumer has proposed a bill that would require lenders to document a borrower”™s ability to pay.
That”™s a law New York state should also consider enacting, said state Sen. Andrea Stewart-Cousins, D-Yonkers.
“I think that is worth looking at at a local level,” she said.
Stewart-Cousins said the state Senate is further considering crafting legislation outlawing the practice of “loan flipping,” where a lender encourages a consumer to get additional cash by refinancing his or her mortgage again and again.
This tactic significantly increases a borrower”™s debt, the senator said, because fees are tacked on to each loan transaction and the borrower may pay a higher interest rate than with the original loan.
“(The law) would make it so a lender can”™t refinance an existing loan unless it provides a tangible net benefit to the borrower,” she said.
One reason for the subprime fallout earlier this year is a lack of consumer knowledge about the practice, she said.
To that end, she and fellow Sen. Jeffrey Klein, D-Bronx, are co-sponsoring a subprime roundtable Tuesday from 9 to 11:30 a.m. at the Grinton I. Will Library in Yonkers.
The public meeting, co-sponsored by Westchester Residential Opportunities Inc., is designed to examine the practices and techniques of lenders in the state, as well as develop protections for consumers of subprime home loans, Stewart-Cousins said.
A panel of experts will be on hand to answer questions from the audience.
Also, Stewart-Cousins said the forum will serve as a public record of comments from people who have been victims of predatory lending, which could be incorporated when the state Legislature moves ahead with some of the above-mentioned bills.
“I think there”™s a real sense of urgency about the situation,” she said.
Beyond Westchester, the subprime mortgage market has generated headlines in the last several months as foreclosures have increased nationally. The nation”™s second-largest subprime lender, New Century Financial Corp., has had its New York state license suspended after it failed to furnish $39 million in funds for 121 approved loans. On March 15, state Attorney General Andrew Cuomo announced his office had begun investigating subprime lenders.