Lending reform isnt over yet, governor says
- steve law
- Portland Tribune - News
Kulongoski calls mortgage panel back to study fixes for '09
Gov. Ted Kulongoski has vowed to reform mortgage lending practices in the 2009 legislative session and is reconvening his task force to tackle some of the issues that were shunted aside during February's special session.
Two Portland members of the governor's Mortgage Lending Work Group said they expect to work on reforming prepayment penalties and other controversial lending practices that have caused foreclosures to spike.
The group's business and consumer representatives earlier had split over lending practices. The only mortgage lending bills that passed during the February session were those that had consensus among the governor's work group members.
Angela Martin, who works on predatory lending issues for the Portland-based advocacy group Our Oregon, said she had higher hopes that genuine lending practice reforms might now emerge from the group.
Our Oregon pushed comprehensive lending reforms that were heavily opposed by mortgage industry lobbies in the 2007 legislative session. The same thing occurred in the February special session.
But now the governor has made it clear he will back mortgage lending reforms, prompting industry and consumer groups to work together again.
'We always said we would address the lending practices issue at a later time, which we're doing now,' said Lou Savage, a senior policy adviser for the state Department of Consumer and Business Services. 'We have made it clear to the members of the work group that the governor is going to be submitting a bill in the 2009 session,' Savage said.
Todd Williams, principal of Evergreen Ohana Group, a Portland mortgage broker and banker, said he expected industry leaders to help craft lending reforms.
'We are happy to delve into some of the meatier and contentious issues relative to mortgage lending reform,' said Williams, one of several mortgage industry representatives on the governor's task force.
He predicted that the group would agree to restrict some prepayment penalties, put limits on certain loan products and attack specific 'abuses' that have occurred in the lending industry.
'I think there'll be consensus on 60 to 80 percent of the major issues that are being addressed,' Williams said.
Senate Bill 1090, the primary reform championed by consumer groups in the February session, banned prepayment penalties, which often trap lower-income or 'subprime' borrowers into loans they can't afford.
The bill also required mortgage brokers to have 'fiduciary duty' to borrowers, making them legally liable to serve customers' best interests. Lenders would have been required to assure that they are putting borrowers into the best deal for them.
That bill was amended to place limits on prepayment penalties, but that watered-down version went down to defeat in February.
Two other bills passed. One cracked down on 'mortgage rescue' companies that purport to help people trapped in unaffordable mortgages, but often wind up taking ownership of the homes.
The other bill made it easier for state regulators to penalize or weed out loan originators who commit fraud or deceptive lending practices.