Margert in the News

Far Rockaway, N.Y., October 7, 2002….New Yorkers seeking mortgages, refinancing existing home loans or seeking to tap the cash built up in their homes gained important protections when anti-predatory lending legislation was signed into law last week, according to New Yorkers for Responsible Lending, a coalition of senior, consumer and civic groups.

On Friday October 4, 2002, Governor Pataki signed the legislation into law. The new homeowner protection law regulates sub prime mortgage lending in New York. Sub prime mortgages are mortgage loans that have high interest rates—well above the prime rate—and high fees. Sub prime loans are made to borrowers with less-than-perfect credit, as well as to those homeowners with good credit who do not realize they are eligible for prime rates and are pressured into taking costlier loans.

"This new law is a giant step forward in terms of protecting New Yorkers who are refinancing their mortgages or accessing the equity in their home," said Stephanie Lawes of Margert Community Corporation, member of New Yorkers for Responsible Lending. Homeowners often take on new mortgages or add to their mortgage debt to cover some unexpected expense, like a new roof or to pay off medical bills.

Predatory mortgage lending practices, such as making unaffordable loans, refinancing loans without benefit to the borrower and packing expensive, unnecessary insurance products into loans, occur overwhelmingly in the sub prime, or high-interest, high-cost segment of the market. Abusive and deceptive predatory loans are a growing problem in all areas of the state—urban, suburban and rural.

As reported in the 9/7/02 edition of The Wave, Rockaway’s local newspaper, New York City Council Member James Sanders, Jr. "joined his colleagues on the Consumer Affairs Committee to pass landmark legislation designed to reduce the destructive practice of predatory lending. Before casting his vote, Sanders spoke briefly about his excitement at the prospect of passage of a bill into which he has committed so much passionate advocacy:

‘I have been involved with many worthy bills since taking the oath of office in January,’ Sanders told the packed committee room. ‘But none commanded the amount of time and energy I gladly expended upon this legislation. This bill is special. I represent a part of Southeast Queens that is the heart of the predatory lending belt,’ Sanders said. ‘I have met dozens of New Yorkers, many of them my constituents, who have been victimized by predatory lenders. People of color are targeted, as are the elderly. Their dream of homeownership is too often transformed into the nightmare of foreclosure.’

The new law, Chapter 626 of the Laws of 2002, applies only to "high-cost loans," i.e., residential mortgages that have either an annual percentage rate that is more than 8% above the interest rate for a comparable length Treasury Bill or where points and fees exceed 5% of the total loan amount. Certain predatory practices would be barred for "high-cost loans," including: making loans that are objectively unaffordable for the borrower; financing credit insurance; excessive broker compensation; and "loan flipping," i.e., refinancing a mortgage without benefit to the homeowner. Borrowers will be able to defend themselves to prevent loss of their home in foreclosure proceedings if they can demonstrate that the loan violated the homeowner protection law.

The new law will take effect in six months and only will apply to loans made from that point forward. New York joins two other states, North Carolina and Georgia, as the only ones in the nation that provide comprehensive protections for homeowners with sub prime mortgages. Participating lenders will offer a wide array of flexible mortgage products that Fannie Mae and Freddie Mac have agreed to purchase and the participating mortgage companies will insure. For more information about the April 26th W-O-W Event, please call Mariadele Priest at Fannie Mae, 1-917-322-8964, or Stephanie Lawes at Margert, 718-471-3724.