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Consumer Advocates Rip Claims Of A Lending Crisis

Home News Tribune — Friday, November 21, 2003


TRENTON — New Jerseyans seeking home loans need not fear the dire warnings of mortgage lenders and brokers who claim the cash flow will soon be curtailed to those with poor credit, consumer advocates said yesterday.

Groups that pushed for the Homeownership Security Act – designed to protect poor, minority and elderly borrowers from deceptive, high-cost loans – called on state regulators to order officials in the banking community to stop a "campaign of disinformation" that has dozens of potential borrowers concerned. The law is slated to take effect on Thanksgiving.

"The only people who have anything to fear is those people whose lending practices victimize people," said Linda Fischer, a leader with AARP and the Center for Social Justice who has worked to stop so-called "predatory lending."

"They're now trying to scare and pressure people to undo the reforms that are about to take place," she said.

Fisher cited a radio advertisement that says lenders are pulling out of state and warns that homeowners will soon be unable to borrow funds for college tuition, debt consolidation, weddings or home improvements. A transcript of the ad also urges homeowners to borrow now, while they still can.

"These lenders are lying to consumers," added Citizen Action's Maura Caroselli, distributing e-mails from angry brokers suggesting brokers will go bankrupt and those most in need of help will be unable to obtain cash.

The State Department of Banking and Insurance agreed the messages from the banking community was misleading and pledged to investigate, spokesman Bill Heine said. Lenders have not informed state officials of their intentions to leave and New Jersey is a hot market that will attract additional business, Heine said, suggesting it was a "manufactured crisis."

Although not all high-cost, or "sub-prime" loans are considered predatory, Heine said about 5 percent of those made in New Jersey do take advantage of the borrower and would be banned by the new law. Fischer said this amounts to a loss of $295 million a year in fees and home equity.

But mortgage brokers – who admit predatory lending does sometimes exist – insist the law is already causing damage. Regardless of the details, lenders concerned about the outcome have already pulled out of the New Jersey market, and some smaller brokers may lose their livelihoods, according to Robert Levy, head of the Mortgage Bankers Association of New Jersey.

Despite the industry's efforts to tailor the bill, Levy said the final version is still vague and that's causing concern among brokers and lenders.

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