According to one report, U.S. borrowers lose more than $9 billion each year because of predatory lenders. But new legislation could help stop many homeowners from losing their homes.
This new law would not only require that all loan officers be registered, but would give homeowners the right to sue their lenders personally if they are refinanced into high cost loans.
And, believe it or not, that has some lenders predicting an end to all refinancing in Illinois.
“Everything togehter, $130,000 disappeared,” says Beata Jelenski, predatory loan victim.
Beata has been fighting to keep her home ever since she refinanced with a predatory lender.
“They always try to scare me. I will lose my house. Always demanding more money, more money, more money,” she says.
Equity-stripping, loan-flipping and destroying homeowners’ credit are some of the predatory lending practices legislators like Monique Davis are trying to stop.
“There are some unscrupulous people out there and they’re causing us to have families lose their homes. And the state of Illinois does not want that to continue,” says State Representative Monique Davis.
Senate bill 1784 requires lenders be able to prove that a refinance had a tangible benefit for the consumer.
“Someone saving $300 or $400 a month is a tangible benefit. A litigator could argue yes, but you took them from 25 years remaining on their loan to a whole new 30-year loan,” says Rob Hardman, Illinois Association Mortgage Brokers.
Which means five more years of interest to pay despite lower monthly payments. But are lenders going to be sued if homeowners are happy with their loans?
“It could just be a free for all for trial lawyers to file class action lawsuits against everyone who does loans in the state of Illinois,” Hardman says.
“If they’re doing the right things, they have nothing to prove. The only time they’re going to have an issue is if they’re engaging in predatory lending practices,” says Judy Rice, city treasurer.
North Carolina, Georgia and New Mexico have passed similar laws with positive results.
“There was recently a study done that showed that type of lending activity that leads to predatory lending loans has gone down while the type of lending activity we want to see expanded which is home purchase loans, went up. So that’s a good outcome,” says Stacie Young, Chicago Affordable Housing project manager.
And perhaps homeowners like Beata will be able to refinance with greater confidence and fewer worries about losing their home.
Senate bill 1724 passed the Illinois House and Senate without opposition. It is sitting on the governor’s desk. He is expected to sign it.