Legislature seeking to cut foreclosures

Indiana Foreclosure & Real Estate News

By Bryan Corbin (Contact)
Wednesday, October 31, 2007

INDIANAPOLIS — Appalled by unethical mortgage-loan brokers offering subprime loans to bad-credit homebuyers, state lawmakers Tuesday endorsed proposals to try to curb Indiana's high rate of home foreclosures.

A bipartisan committee of lawmakers spent hours crafting legislation that will be introduced into the 2008 session of the Legislature.

Both Rep. Mike Murphy, R-Indianapolis, and Sen. Tim Lanane, D-Anderson, expressed concern that first-time homebuyers have been rushed into signing adjustable-rate mortgages at the day of closing without realizing their payments would increase substantially once interest rates "reset" in a few years. "For the potential homeowner, it's the biggest decision of their life," Murphy said. "They are under emotional pressure, sales pressure, time pressure, they may have movers already scheduled — the whole thing already lined up and ready to go. And they don't get the (closing documents) until two hours ahead. That's where we run into a lot of problems."

The panel of lawmakers, formally known as the Interim Committee on Mortgage Lending Practices and Home Foreclosures, sifted through 27 proposals for a final report to the Legislature. That report will be the blueprint for legislation introduced in the 2008 session. Among other things, the lawmakers endorsed:

n Regulating the mortgage-only lending offices that currently operate with little regulation.

n Requiring fingerprinting of anyone seeking a license as a real estate appraiser, loan broker or loan originator.

n Increasing the criminal and civil penalties for mortgage fraud.

n Requiring lenders to provide borrowers a summary of how their adjustable-rate mortgages or ARMs will "reset" to higher interest rates — and higher payments — in a few years.

Rep. Woody Burton, who has worked as a Realtor for decades, said bad lending practices in the subprime market have contributed to Indiana's current ranking as 10th in the nation for foreclosures. Burton, R-Greenwood, said he believes a small proportion of mortgage brokers abused the system, offering loans for more than houses were worth to high-risk borrowers.

Starting in the 2007 session and continuing in 2008, state lawmakers are taking corrective measures to crack down on such practices, Burton said. "I think the legislation that is going to move here is going to make a huge step, because it will send a signal to the real estate industry that we're not going to tolerate any of this crazy stuff, this predatory lending," Burton said.

Lawmakers also endorsed preliminary legislation recommended by Indiana Securities Commissioner Chris Naylor to require fingerprints and FBI background checks of mortgage brokers, to adopt a national licensing system for lenders and brokers, and to hold legally accountable anyone who received funds in a mortgage transaction knowing it was fraudulent.

Such proposals prompted a note of caution from the Indiana Mortgage Bankers Association. "We think that the requirement of holding lenders responsible for actions of appraisers is like arresting someone whose home has been robbed," said Tom Dinwiddie, the association's legal counsel. "(The lenders) get appraisals to make a loan. If the appraisal is bad, they are victimized by that appraisal."

 

For more Indiana foreclosure news, please visit the Indiana Foreclosure home page.

Article Source http://www.courierpress.com/news/2007/oct/31/legislature-seeking-to-cut-foreclosures/