Predators' teeth pulled
Two weeks ago, just when it looked like Georgia would have a tough predatory lending law, mortgage brokers tried to pull an end run on consumers. The brokers — who make tidy sums by conning borrowers into expensive loans — convinced a federally subsidized mortgage wholesaler, Fannie Mae, to voice its opposition to the pending state law.
A counter-counterattack succeeded, however. In Washington, U.S. Rep. Cynthia McKinney went to work. And at the Gold Dome, Gov. Roy Barnes' muscle was evident. Eventually, Fannie Mae retreated. The bill was passed.
The final law is "acceptable, actually pretty good," says the state's arch-nemesis of predatory lenders, Sen. Vincent Fort.
Key to the law is that it sets "triggers" — 8 percentage points above the rate for Treasury bonds. That totals 13.9 percent currently. If a loan exceeds that, or if it charges more than 5 percent for fees and other padding, then the lender would be prohibited or restricted in some activities — such as having a balloon payment at the end of the loan, charging prepayment penalties, and forcing borrowers to purchase insurance.
Some predatory practices still are allowed, although restricted. "Flipping" loans — where lenders encourage borrowers to refinance over and over again, running up repetitive fees and expenses — would still be allowed, but only after a loan is 5 years old.
And, the state law pre-empts local governments from having their own legislation — such as laws in Atlanta and DeKalb County that restrict the governments from doing business with predators.