Legislator: Indiana Mortgage Lenders Can’t Hide For Long
The number of Indiana mortgage problems and the forest of foreclosure signs will continue to grow as a result of the lending industry’s blocking of common sense reforms in the Indiana General Assembly.
These words, and those that follow, are those of Mike Murphy, an Indiana state legislator who wants greater action taken to prevent widespread turmoil in the struggling mortgage market.
Republican and Democrat reformers joined forces early in the legislative session to craft a bill that would help ensure that home buyers have critical information before signing a contract to build a home or to take on an Indiana mortgage.
House Bill 1525 would have required Indiana lenders who profit from these home mortgages to provide a ballpark estimate of property taxes that will come due on a home, and to educate buyers whose credit history suggests they could be susceptible to foreclosure.
The foreclosure crisis has been documented in the media.
Indiana ranks third nationwide in the percentage of homes foreclosed. The Indianapolis housing market suffers one of the worst foreclosure rates of any large city in America.
But the numbers do not tell the human story. Thousands of young couples are seduced each year by billboards advertising “$1 per month payments” and “zero down, adjustable-rate mortgages” for attractive new model homes.
The allure of home ownership often blinds them to important questions any potential home buyer should ask.
If they inquire about future property taxes, builders and home mortgage lenders alike say they cannot give an estimate, and assure the young dreamers that $50 per month in escrow is adequate to start.
When the new homeowners are hit with a $3,000 to $4,000 property tax bill one year later, they often lose their home to foreclosure because they cannot afford the taxes, and they have no equity in the home to protect.
The couple ends up with no home, no credit and no hope.
As foreclosures in a neighborhood mount, resale values plummet, causing a downward spiral that can destroy the economic vitality of the area.
Everyone is affected.
You would think a mortgage lender would be scrambling to help stem the tide of foreclosures. Think again. Mortgage lenders do not want to solve the problem because they are making too much money.
The subprime, or bad credit, mortgage loan market alone has grown from $35 billion to $625 billion in just five years.
Large national builders, who often own their own mortgage companies, and multistate mortgage banks approve questionable loans and then sell the mortgages to investors in the form of asset-based securities.
Everyone profits - except the young couple digging a deeper hole for themselves every day.
HB 1525 passed the Indiana House, 96-2. Then the lobbyists for the mortgage lenders went to work. They had a long list of objections to providing basic information to their customers. Chief among them were cost and liability.
We answered their concerns, to no avail.
The legislation was amended to protect lenders from being sued in case of inaccurate property tax estimates.
The Indiana Housing and Community Development Authority and Department of Local Government Finance were willing to offer online consumer info and a mortgage calculator for estimating property taxes, at no cost to lenders.
Each time an issue was resolved with the help of the Daniels administration and legislative leaders such as Reps. Jeb Bardon and Vanessa Summers, new obstructions were created.
Finally, mortgage lender lobbyists claimed “federal pre-emption,” a catch-all term that allows them to hide behind federal regulators.
In the end, the bill died, 49-48.
The mortgage lenders and their lobbyists were able to parse their way around their moral obligation this year. They will not escape accountability indefinitely.
The U.S. Justice Department and the FBI are investigating a builder/lender active in the Indianapolis area for foreclosure rates of 13 percent. I will continue to work with men and women of good will to ensure potential home buyers enter a deal with their eyes wide open.
Meanwhile, young homeowners continue to struggle.
They do not have lobbyists. All they have is a dream. And those dreams are being broken by the thousands as mortgage broker and lender groups continue to put profit before principle.
SOURCE: Indianapolis Star