NEWS RELEASE

For Immediate Release:             For more information contact:
Jan. 10, 2008                              Lisa Church 660-826-2822

Pearce, Harris to file bill to fight predatory lending

JEFFERSON CITY, Mo. – State Reps. David Pearce, R-Warrensburg, and Jeff Harris, D-Columbia, will file bipartisan legislation today to crack down on predatory lending practices that often result in financial devastation for borrowers.

The bill, modeled after innovative legislation adopted this year in Minnesota, targets the business practices of subprime lenders that have sparked a nationwide mortgage crisis and a drastic rise in home foreclosures.

“Because of predatory lending practices, the dream of home ownership often turns into a nightmare of excessive hidden fees, exploding interest rates and ultimately foreclosure,” Harris said. “Existing state law does little to protect Missourians from unscrupulous lenders who willingly lead borrowers down to the road to financial ruin.”

Said Pearce: “I am glad to be part of this bipartisan effort to provide some relief to the subprime crisis in our country and state. No one wins when homes are foreclosed.”

Key provisions of the bill include:

• Prohibiting penalties for making early payments and capping the fees that lenders may charge.

• Requiring lenders to verify that borrowers will be able to make monthly payments on variable rate mortgages when the rate rises after the low introductory rate expires.

• Barring lenders from “steering” borrowers who qualify for prime rate loans to subprime deals.

• Imposing a fiduciary duty on lenders to act in the best interest of the borrower rather than their own best interest.

• Prohibiting lenders from “churning” or “flipping” loans unless doing so provides a reasonable and tangible benefit to the borrower.

• Providing borrowers the right to sue their lender for violating laws against predatory lending practices.

“Our legislation would provide Missourians will real protections to ensure they don’t lose their homes,” Harris said. “Reputable financial institutions should have no problem complying with these regulations.”

Pearce said the bill wouldn’t result in additional regulation for most locally based lending institutions.

“This legislation is geared toward out-of-state, large national firms who preyed on unsuspecting consumers who were trying to reach the American dream of home ownership, not local bankers, credit unions or local mortgage bankers.”

The Association of Community Organizations for Reform Now supports the bill. ACORN played an instrumental role in the passage of the Minnesota law.

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