Protecting borrowers Consumer advocates said the need for counseling and other provisions is the result of lenders taking advantage of unsophisticated borrowers. The bill would also require contractors to give borrowers written warnings against mortgaging their house in return for a home improvement loan. At settlement, the lender, title insurance company and mortgage broker would have to certify a loan is not predatory. Predatory lenders also would no longer receive government housing funds. The bill would also require the city pension fund to divest of holdings of companies considered predatory lenders.
Several brokers argue that the bill is already having a negative impact.
They said a number of large mortgage lenders have taken steps in recent weeks to limit the types of loans they make in the city. Some lenders will no longer provide mortgages or refinancing for rowhouses. Rather than risk charges of red-lining, many lenders will use the proposed city ordinance as a reason to leave the city all together, said broker Scott Brown of Great American Capital. Industry representatives and watchdog groups point out federal and state laws designed to protect borrowers already exist. The law also prohibits lenders from making mortgage loans based just on the value of the property without consideration of the borrowers' ability to make the payments.