Proposed bill on homeowners' side
Mortgage Lending Act would raise industry standards, make terms understandable
State agencies regulate auctioneers, barbershop stylists and funeral home operators, but they don't watch over the professionals who are in charge of what is often the largest purchase of a person's life.
Mortgage Lending Act
Mortgage lenders and their loan officers do not have to obtain a state license to practice in South Carolina. That would change under a state proposal that aims to strengthen lending industry standards and make it easier for homeowners to understand the terms of their mortgage.
The goal of the bill, which the Senate gave key approval last week, is to protect homeowners from risky mortgages and sketchy lenders.
During the past decade, relaxed lending standards led to creative loans that started out with low monthly rates and reset to higher rates. Some homeowners who relied on these types of loans, called adjustable-rate mortgages, have fallen behind in their payments, leading to dramatic increases in foreclosures nationwide.
What would it do?
The South Carolina Mortgage Lending Act, which is weaving through the Senate's lawmaking process, would:
-- Criminalize mortgage fraud.
-- Establish state licensing requirements for mortgage lenders and loan officers.
-- Strengthen standards for mortgage brokers.
-- Make mortgage documents more transparent.
The bill — had it been in place several years ago — might have prevented some homeowners from taking these types of risky loans, said Brandolyn Pinkston, administrator for the state's Department of Consumer Affairs.
"It would have helped people see the fully indexed rate that their mortgage would have adjusted to," she said. "A lot of people said they had no idea (their rate would reset), even though they initialed each page. Closing a loan is a difficult thing to do. People want to get into a home — that's the American dream — and they believe and trust mortgage professionals."
South Carolina is one of only two states in the country that doesn't require licenses for mortgage lenders, according to the National Association of Mortgage Brokers. Indiana is the other state.
The bill would require mortgage lenders and their loan officers to obtain a state license and take continuing education classes on their profession.
It also strengthens standards for mortgage brokers, who already are licensed by the state. Brokers, who act as an intermediary between borrowers and lenders, would have to submit fingerprints and consent to a federal criminal background check.
Another part of the bill addresses the state's mortgage lending disparity, which caused fury among civil rights advocates across the Lowcountry. Last year, a national study showed that the difference between what members of minority groups and whites pay for mortgage loans is larger in the Charleston area than in any other metropolitan area in the nation.
The bill also would allow state agencies to obtain more information from loan applicants, such as the applicant's credit score and the property's appraised value. The information would help state agencies explore the problem further and deter some lenders from discriminating.
Reach Katy Stech at 937-5549 or kstech@postandcourier.com.
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Comments
rmsems (anonymous) says...
yes, and some mortgage brokers I know, didn't even finish high school and like one who told me from a Charleston bank, they only use a certain appraiser who appraises higher than sales price:
1. it not only pushes the sale through, but
2. it also makes the bank look better on paper ... they look like having tons of assets which they don't and their CEO gets paid about 480000 USD plus per year even though to quote the p&c "For the first six months of the year, the holding company's net income was off nearly 40 percent to $1.7 million, or 30 cents a share, compared to the first half of 2006" (The Post and Courier
Tuesday, July 17, 2007) and of course worse this year "the three months ended March 31 of $744,000, or 16 cents a share, compared with $831,000, or 14 cents a share, for the same period last year" (By Peter Hull (Contact)
The Post and Courier Friday, April 11, 2008). Their assets are grossly inflated. All executive's salaries amount to $947,074 USD/year?!
Why would anyone with sound mind invest in a company like this? I am sure glad to see tighter restrictions on people who are working in that industry.
April 29, 2008 at 4:47 a.m. ( permalink | suggest removal )
nappyd (anonymous) says...
It's useless if no one regulates the appraisers who set/inflate home prices so realtors & lenders can make the commissions they want while doing as little work as possible.
April 29, 2008 at 8:38 a.m. ( permalink | suggest removal )
southerner (anonymous) says...
Responsibility: What's happened to it? If people are smart enough to buy a house, then they should be smart enough to make sure that they are not cheated or lied to. What is happening to Americans, are we so dependent on Government to take care of us, to help us get out of the mistakes we have made, to control prices ? This is a capitalistic country, you work for what you get and you buy at what you think you should pay for something. Most people when they go job hunting will try and get as much money as possible, they will also make sure they are getting a retirement package that is great. So why not the big C.E.O.. If you think the cost of something is to high, go elsewhere. People need to stop complaining about something they got themselves into and the government needs to stop treating us as children that don't have the common sense to make a decision on their own and be held responsible for it. ENOUGH!
April 29, 2008 at 8:41 a.m. ( permalink | suggest removal )
rmsems (anonymous) says...
Early,
you are absolutely right and the sad thing is, when people see a payment of 500 USD or something like this for a 250,000 USD loan, they tend to believe this is it, because they want to believe this is it. They don't once stop and calculate that this amount will not even cover the interest rate.
April 29, 2008 at 8:56 a.m. ( permalink | suggest removal )
majorjohnson (anonymous) says...
Southerner is correct. If you borrow $250,000 and don't even realize you just took an ARM you shouldn't be borrowing money. The people who are losing their homes thougt they could just initial the documents and not pay any attention to what the documents say.
Part of this problem is also government and civil rights entities forcing the lending institutions to make mortgages to people who have not saved for down payment, extra cash for emergencies, need interest only ARMS to even get into the house. Charleston even was loaning people the down payments, like that makes some kind of sense. If you don't have the wherewithal to save up at least 10%, what makes you think you have the wherewithal to save emergency cash in case you end up between jobs, or have to buy a new car? I'd also bet a large percentage of these people buy groceries on a credit card and have no clue that they are paying 21% interest on their food, and have a house full of brand new furniture and appliances they are also paying interest on, and have a new model car they are paying interest on.
April 29, 2008 at 9:19 a.m. ( permalink | suggest removal )
mortgagepro (anonymous) says...
This article is somehwat misleading. Mortgage brokers in South Carolina are regulated by the Department of Consumer Affairs. Brokers and loan officers are licensed and currently are required to complete annual continuing education. You can read this at: http://www.scstatehouse.net/sess115_2... and get additional information here:http://www.scconsumer.gov/licensing/mortgage_brokers.htm
The only individuals that are not regulated by the Dept. of Consumer Affairs are loan officers employed at Federally Chartered Banks.
April 29, 2008 at 9:40 a.m. ( permalink | suggest removal )
Test2007 (anonymous) says...
Responsibility: What's happened to it? If people are smart enough to buy a house, then they should be smart enough to make sure that they are not cheated or lied to.
Umm, you ever think that MAYBE people should not be lying to or cheating the consumers in the first place? Just a thought. Maybe it is a little out there.
April 29, 2008 at 11:02 a.m. ( permalink | suggest removal )
JohnS (anonymous) says...
Should Car salesmen or dealership finance managers also be regulated by the state? Many car's cost 30,000.00 to 50,000.00 now.
April 29, 2008 at 11:10 a.m. ( permalink | suggest removal )
cougar (anonymous) says...
What the author of this article conveniently forgets to mention is the fact that every real-estate secured transaction is required by state law to be witnessed and explained by a state licensed attorney. They are required by law to explain every detail of the mortgage they are closing to the borrrower. Why is no one bringing them to blame for this debacle?
In regards to SC being only one of two states that does not license mortgage lenders, it is one of a handful of states, if not the only state, that requires an attorney to be present at all mortgage closings. One would think that requirement would limit the number of shady mortgages being done in this state, which, by the way, is much lower than the national average.
If we are going to license mortgage lenders, what about licensing credit card companies as well? Their rates and policies and typically much more confusing than some of the most confusing types of mortgages.
I believe the sole purpose of the state creating this bill is to provide more fee revenue which will eventually be wasted by our elected officials on some other meaningless policy.
April 29, 2008 at 2:01 p.m. ( permalink | suggest removal )
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