Mortgage Lending Practices
Subprime and Predatory Mortgage Lending
This page addresses fraudulent or abusive lending practices in the mortgage market, commonly referred to as predatory lending. The most prevalent categories of abusive practices include:
-
Loan flipping-repeatedly refinancing loans, charging high fees each time.
-
Excessive fees and "packing"-adding fees far exceeding those justified on economic grounds, often through loan terms, such as the financing of points, fees and pre-payment penalties, single-premium insurance (to cover the balance of the loan should a borrower die, paid in one sum and added to the amount financed) and balloon payments (those due at the end of a loan that are significantly higher than monthly payments).
-
Asset-based lending-lending based on a borrower's overall assets, rather than income and ability to repay.
-
Outright fraud and abuse.
Legislation regarding foreclosures is covered on the Foreclosures page. Legislation regarding the specific crime of mortgage fraud is covered on the Mortgage Fraud page.
NCSL Information
Current State Laws || Federal Activities
Legislation Last Updated: June 12, 2008
NCSL Staff Contacts: Heather Morton, Denver
Current State Laws
State:
|
Statutory Citation
|
Flipping Banned
|
Negative Amortization Banned
|
Prepayment Penalties Banned
|
Financing Credit Insurance Banned
|
Consumer Credit Counseling Provision
|
High Debt to Income Ratio Provision
(Ability to repay loan)
|
Arkansas
|
Ark. Stat. Ann. §23-53-101 et seq.
|
X
|
X
|
|
X
|
3rd party required
|
Give due regard
|
California
|
Cal. Financial Code §4970 et seq. and §4973 et seq.
|
X
|
X
|
|
|
Disclosure
|
Presumption at 55%
|
Colorado
|
Colo. Rev. Stat. §5-3.5-101 et seq. and §38-40-105
|
X
|
X
|
|
|
Notification
|
Give due regard
|
Connecticut
|
Conn. Gen. Stat. §36a-746 et seq. and §36a-521
|
|
X
|
|
|
Notification
|
Presumption at 50%
|
D.C.
|
D.C. Code Ann. §26-1114. and §26-1151.01 et seq.
|
|
X
|
X
|
|
|
Give due regard
|
Florida
|
Fla. Stat. §494.0078 et seq.
|
X
|
X
|
|
|
Notification
|
Give due regard
|
Georgia
|
Ga. Code §7-6A-1 et seq.
|
X
|
X
|
|
X
|
3rd party required
|
Presumption at 50%
|
Illinois
|
Ill. Rev. Stat. ch. 815, 137/1 et seq. and ch. 765, 77/70
|
X
|
X
|
|
X
|
Notification
|
Presumption at 50%
|
Indiana
|
Ind. Code 4-6-12 and 24-9-1 et seq.
|
|
X
|
|
X
|
3rd party required
|
Give due regard
|
Kentucky
|
Ky. Rev. Stat. §294.010 et seq. and §360.100
|
X
|
X
|
|
X
|
Notification
|
Presumption at 50%
|
Louisiana
|
La. Rev. Stat. Ann. 6:1096(G) and 9:3572.6(C)
|
|
|
|
|
|
|
Maine
|
Me. Rev. Stat. Ann. tit. 9-A, §2-509, tit. 9-B, §429; tit. 9-A, §8-103, §8-206-A, tit. 9-A, §10-102 and tit. 33, §506, 2007 Chapter 273, 2008 Chapter 471
|
X
|
X
|
X
|
X
|
3rd party required
|
Give due regard
|
Maryland
|
Md. Commercial Law Code §12-127, 12-311, 12-409.1 and 12-1029
|
X
|
X
|
|
X
|
3rd party required
|
Presumption at 45%
|
Massachusetts
|
Mass. Gen. Laws Ann. ch.183C, 1 et seq.
|
|
X
|
X
|
|
3rd party required
|
Presumption at 50%
|
Michigan
|
Mich. Comp. Laws §445.1631 et seq.
|
|
X
|
|
X
|
Notification
|
|
Minnesota
|
2007 Chapter 18
Minn. Stat. §58.137
|
X
|
|
|
|
Notification
|
Requires vertification
|
Missouri
|
Mo. Rev. Stat. 375.937
|
|
|
|
|
|
|
Montana
|
Mont. Code Ann. §32-5-306
|
|
|
|
|
|
|
Nebraska
|
Neb. Rev. Stat. §45-702, 45-704 and 45-705
|
|
|
|
X
|
|
|
Nevada
|
Nev. Rev. Stat. §598D.010 et seq.
|
|
|
X
|
X
|
|
Give due regard
|
New Jersey
|
N.J. Rev. Stat. 46:10B-22 et seq.
|
|
X
|
|
X
|
3rd party required
|
|
New Mexico
|
N.M. Stat. Ann. §58-21A-1 et seq.
|
X
|
X
|
X
|
X
|
3rd party required
|
Give due regard
|
New York
|
N.Y. Banking Law 6-l
|
X
|
X
|
|
X
|
Notification
|
Give due regard
|
North Carolina
|
N.C. Gen. Stat. §24-1.1E, §24-1.1F, §24-10.2 and §53-243.01 et seq.
|
X
|
X
|
|
|
3rd party required
|
Presumption at 50%
|
Ohio
|
Ohio Rev. Code Ann. §1322.062, §1322.07, §1322.08, §1345.01 et seq. and §1349.25 et seq.
|
X
|
X
|
|
X
|
|
Give due regard/
Presumption at 50%
|
Oklahoma
|
Okla. Stat. tit. 14A, §3-204 and tit. 59, §2081 et seq.
|
X
|
|
|
|
|
Give due regard
|
Pennsylvania
|
Pa. Cons. Stat. 63, §456.101 et seq.
|
|
|
|
|
Notification
|
Presumption at 50%
|
Rhode Island
|
R.I. Gen. Laws §34-23-5
R.I. Gen. Laws §34-25.2-1 et seq.
|
X
|
X
|
|
X
|
3rd party required
|
Presumption at 50%
|
South Carolina
|
S.C. Code Ann. §37-23-10 et seq.
|
X
|
X
|
|
X
|
3rd party required
|
Presumption at 50%
|
Tennessee
|
Tenn. Code Ann. §45-20-101 et seq.
|
X
|
X
|
|
|
|
Presumption at 50%
|
Texas
|
Tex. Finance Code §343.001 et seq. and Tex. Gov. Code §2306.001 et seq.
|
|
X
|
X
|
|
|
Give due regard
|
Utah
|
Utah Code Ann. §61-2d-101 et seq.
|
|
X
|
|
X
|
Notification
|
|
Virginia
|
Va. Code §6.1-422.1 and §6.1-422
|
X
|
|
|
|
|
|
Washington
|
Wash. Rev. Code §31.04 et seq.
|
|
|
|
|
|
|
West Virginia
|
W. Va. Code §31-17-1 et seq.
|
|
|
X
|
|
|
|
Wisconsin
|
Wis. Stat. Ann. §428.202 et seq.
|
X
|
X
|
|
X
|
Notification
|
Give due regard
|
Definitions of provisions:
Flipping: refinancing an existing mortgage loan with no benefit to the consumer; also referred to as churning.
Negative amortization: payment terms under which the outstanding principal balance will increase at any time over the course of the loan because the regular periodic payments do not cover the full amount of interest due or terms under which the aggregate amount of the regular periodic payments would not fully amortize the outstanding principal balance.
Federal Activities
Combating Predatory Lending
Office of the Comptroller of the Currency
NCSL objects to two new rules implemented January 7, 2004, by the Office of the Comptroller of the Currency (OCC) to exempt national banks from state consumer protection laws and enforcement actions. Click here to review press release.
On April 17, 2007, the U.S. Supreme Court upheld the OCC exemption of national banks and their subsidiaries from state state consumer protection laws and enforcement actions. Click here to review the decision, Watters v. Wachovia.
Federal Reserve System
Dynamic Maps of Nonprime Mortgage Conditions in the United States
The maps, which are maintained by the Federal Reserve Bank of New York, display regional variation in the condition of securitized, owner-occupied subprime, and alt-A mortgage loans. The maps and data can be used to assist in the identification of existing and potential foreclosure hotspots.
|