Massachusetts Attorney General Martha Coakley last week unveiled aggressive regulations designed to curb the orgy of irresponsible lending that led to the subprime meltdown. The measures, among the strictest in the nation, enjoin lenders from profiteering or ignoring a prospective borrower’s financial situation.
Under the new regulations:
- Lenders will be required to treat all borrowers fairly and equally;
- Lenders must have a “reasonable belief” that the borrower can repay the proposed mortgage;
- Lenders would be required to offer the cheapest loan for which the borrower qualifies;
The state legislature may soon augment the Attorney General’s regulations with additional requirements.
The Massachusetts Senate in June adopted many of Governor Deval L. Patrick’s proposals for increased regulation. The version before the House today is similar. Mortgage brokers and lenders must be licensed, pay an annual fee and be subject to greater regulation and oversight by the Massachusetts Division of Banks. The money would be used to finance housing counselors who would assist first-time homebuyers planning to use adjustable-rate loans.
The legislation would also give borrowers a 90-day grace period in which to catch up on loan payments if they fall behind. And it limits the fees lenders can charge if borrowers convert from adjustable-rate loans to fixed-rate loans, which are generally easier to repay.
Massachusetts’ regulations only protect Massachusetts residents, but on Wednesday, Representative Barney Frank (D-MA), Chairman of the House Financial Services Committee, will introduce his own proposals that could extend similar protections to everyone.
State toughens rules on mortgages [Boston Globe]
(AP Photo/Reed Saxon)