NEW YORK, June 25 /PRNewswire/ -- In a letter sent today to New York State
Assembly Speaker Sheldon Silver, The Bond Market Association warned that
pending legislation aimed at stopping predatory lending would have the
unintended consequence of dramatically curtailing the availability of
residential mortgage credit to low and moderate income borrowers. The
legislation would also make it significantly harder for New Yorkers with
imperfect credit records to get mortgage financing.
The State Legislature is currently considering Assembly Bill 11856 which
proponents say is a targeted initiative to curb predatory lending in the
so-called "subprime" mortgage market. The Bond Market Association, on the
other hand, says the most likely effect of the legislation is to drive lenders
and loan purchasers out of New York's $3.9 billion subprime market.
"If this bill becomes law, ordinary New Yorkers who happen to have lower
incomes or who have troubled credit histories, will find it much more
difficult and expensive to get a mortgage," said Micah Green, president of The
Bond Market Association. "This bill would deny the American dream of home
ownership to thousands of New Yorkers."
The Association has consistently supported efforts aimed at stopping
predatory lending, a practice in which some unscrupulous lenders take
advantage of borrowers but, at the same time, has also worked hard to preserve
the subprime residential mortgage market, which makes financing available to
millions of borrowers who might not otherwise be able to obtain it. The
Association notes there is a substantial difference between lenders who
directly negotiate mortgage loans with individual borrowers, and loan
purchasers and investors in the secondary market who buy and sell pools of
those loans. Enforcement of appropriate lending practices and permissible loan
terms should be aimed principally at mortgage lenders, rather than at
secondary market investors.
"Predatory lending is indefensible and must be stopped," said Mr. Green.
"Assembly Bill 11856, however, goes far beyond targeting the specific abuses
of bad actors to threaten the very existence of the subprime market. More
balanced and responsible measures are available to address predatory lending,
without risking disruption in the availability of residential mortgage credit
to subprime borrowers who need it most."
The Association warns the pending legislation would create an open-ended
liability for financial institutions that purchase or securitize "high cost
home loans," as defined in the bill. Purchasers of loans would be liable for
alleged violations of mortgage lenders they did not know of, did not
participate in and could not have prevented. Further, the bill would establish
draconian penalties and damages, including the voiding or rescission of loans
regardless of how immaterial or technical the underlying violation may have
been. The bill would also expand the scope of subprime mortgage loans
presently subject to assignee liability, as well as substantially increase the
range of legal claims that may be brought by borrowers against innocent,
subsequent holders of those loans.
"These extreme provisions place unprecedented and unwarranted penalties on
the secondary mortgage markets, which is the ultimate source of capital for
subprime residential mortgage borrowers" said Mr. Green. "If the bill is
enacted, we fear that reputable financial institutions will cease to conduct
business in the legitimate subprime mortgage lending market, depriving
thousands of New Yorkers of access to credit."
The Bond Market Association represents securities firms and banks that
underwrite, trade and sell debt securities both domestically and
internationally.
SOURCE The Bond Market Association
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Related links:
http://www.bondmarkets.com
CONTACT:
Jon Teall, +1-212-440-9426, or Myra L.
Dandridge, +1-202-434-8421, both of The Bond Market Association
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