Predatory Lending Program is Suspended

Posted by Judy Orr on Monday, January 22nd, 2007 at 11:52am.

halting predatory lending program for real estate salesIn September of 2006, I wrote an article summarizing the Predatory Lending Program.  The full name of the program is Illinois Predatory Lending Database Pilot Program, also known as HB 4050.   I gave my opinion that I didn't feel the program was fair for sellers and buyers in the targeted zip codes and I didn't feel it was put together properly.  In fact, one of the reasons it has been suspended is because many lenders just didn't understand the program and would not participate, leaving some buyers unable to get any kind of mortgage financing.

One of the reasons Governor Blagojevich cited was the study put together by the University of Illinois which showed sales in the affected zip codes declined by 50% whereas sales had only slowed down 20% in other areas not in the program.  The time frame for comparison was from the fall of 2005.

Proponents of the program felt that predatory lenders were no longer able to provide financing in the zip codes affected by this law and that is what the law was designed for.  By repealing the pilot program, they feel that these bad lenders will come back into the market again.

Governor Blagojevich was quoted as saying, "I am stopping the program until we can find a system that effectively fights predatory lending and protects home buyers."  In the meantime, there is a political battle between the governor and the senate (at least sponsors of the law).  The governor's office states that the governor's actions are legal.

This law was being watched closely by the Illinois Association of REALTORS® and others.  It seemed like the majority of real estate related organizations were not happy with the law and felt that instead of helping buyers, it would hinder both buyers and sllers in the targeted areas, which has been shown to be true.

As a REALTOR® with 23 years of experience I work with established mortgage brokers and banks which I do pass on to interested buyers.  However, I cannot force a buyer to use the companies that I provide them with (I give them a list to choose from).  I suppose buyers that might not be able to get a loan from any of the companies I use might find one of these predatory lenders willing to finance them.  Or they might be enticed by lower rates, closing costs or mortgage payments.

I would never want a buyer to be the victim of a bad lender but there has to be a better way to force these predatory lenders out.  I hope such a way that will protect buyers and sellers and penalize the bad lenders can be figured out.  With the current program it seemed like buyers and sellers were being penalized along with the bad lenders.

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