August 4, 2000

Changes, hearing target lenders

By TOM WALSH

Mortgage lenders targeting people with poor credit histories will face tougher regulations under proposed changes to the state's Truth-in-Lending law announced yesterday by Banking Commissioner Thomas Curry.

"The changes are all designed to tighten up some of the more egregious terms and conditions that have been observed in predatory loans," Curry said.

Predatory lending is generally defined as loans with hidden fees and steep interest rates sold with high-pressure sales pitches, most often targeting low-income people with poor credit histories.

Curry issued the proposals as the Federal Reserve Board of Governors considers possible rule changes. The board will hold today a daylong public hearing on predatory lending.

The state regulations would lower trigger levels at which the high-cost mortgage loan provisions kick in.

The proposed regulations would require lenders' advertising to spell out the downsides of high-interest loans, and to have borrowers sign a disclosure form advising them to seek a better deal. The regulations would keep many fees from being wrapped into the loan and prohibit lenders from charging "unconscionable" rates and terms.

Curry said the regulations also seek to stop the practice of "loan flipping," where lenders encourage people to refinance frequently, subjecting them to fees and higher interest rates.

Housing activists and law enforcement representatives plan to ask the Federal Reserve Board today to strengthen its regulations.

"We want to make sure, in these areas where consumers' homes are at stake, the laws are as clear and as tough as they can be," said Assistant Attorney General Pam Kogut.

Bruce Marks, of the Neighborhood Assistance Corp. of America, said he will ask the Fed to limit fees by lenders, reduce interest rate caps and require more disclosure of loan terms.

Howard Miselman, the chairman of the Massachusetts Mortgage Bankers Association, said his group would support some changes, but nothing "overly restrictive."

The hearing is scheduled to start at 9 a.m. at the Federal Reserve Bank of Boston at 600 Atlantic Ave.

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