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Lenders Pull Out of Mortgage Markets in Maryland, USA if a court does not bar an anti-predatory ordinance from going into effect
American Banker  Tuesday, March 7, 2006
By Erick Bergquist <>

More lenders may leave or pull back from the Montgomery County, Md., mortgage market if a court does not bar an anti-predator ordinance from going into effect there Wednesday, a Mortgage Bankers Association official said.

Over three dozen lenders or securitizers have told the Maryland Association of Mortgage Brokers that they would exit or pull back from the market, but Countrywide Financial Corp. told American Banker last week that it would stay. National City Corp. said it would continue to make retail loans in the county.

Nonetheless, Paul Richman, the MBA's senior director of government affairs, said on a conference call Monday that "a lot of lenders" have told the group they are waiting for the Circuit Court for Montgomery County to weigh in today on an industry-led effort to bar the ordinance from going into effect before announcing whether they will continue lending in the county.

In addition to expanding the county's ban on discrimination to include loan buyers, brokers, and servicers, the ordinance would increase the ceiling on damages for "humiliation and embarrassment" to $500,000 per occurrence, from $5,000.

The county's Commission on Human Rights would enforce it.

Mr. Richman said that by barring "excessive" charging of fees, the ordinance would add "more ambiguity to the lending industry than clarity," lead lenders to be "more subjective" in their underwriting decisions, and encourage "frivolous" litigation.

Community activists applauded the legislation.

John Taylor, the president and chief executive officer of the National Community Reinvestment Coalition in Washington, wrote a letter last week to Housing and Urban Development Secretary Alphonso Jackson asking him to "investigate the discriminatory actions" of the lenders that chose not to lend in the county.

Jay Brinkmann, a vice president of research at the MBA, reiterated on the conference call that the group is "supportive" of a national anti-predator standard introduced in the House by Reps. Robert Ney, R-Ohio, and Paul Kanjorski, D-Pa.

The MBA does not expect Congress to act on the bill until next year, but "there are a lot of rumors about something happening in the first or second quarter of this year," Mr. Brinkmann said. "Several senators are considering introducing something along the lines of Ney-Kanjorski."

If the county ordinance is upheld, lenders will be "much less likely to make loans that raise the specter of this regulatory risk," Mr. Brinkmann said.

In 2004, the most recent year for which the MBA has data, 560 lenders made over $66 billion of loans in the county, he said.

Instead of measures like the Montgomery County ordinance, the "real answer" to predatory lending is "education and shopping around" for a lower rate or better terms by borrowers, Mr. Brinkmann said.

The borrower "needs to get multiple offers," he said. "If they reflect the same level of rates and fees, then maybe they are rates and fees which indicate the borrower's risk."

ID: 37121
Author(s): NCRC
Publication date: 07/03/06

Created: 29/03/06. Last changed: 30/03/06.
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