Tuesday, February 27, 2007
About the Author
Ed Jurenas of Bath is president of the Maine Association of Mortgage Brokers.
Both a recent Portland Press Herald editorial ("Consumers can lose with mortgages made easy," Feb. 21) and a news article by staff writer Tom Bell ("Subprime subterfuge," Feb. 18), help drive the issue of predatory mortgage lending to center stage in Maine.
Unfortunately, both of these infer that Maine mortgage brokers are the prime perpetrators of abusive lending practices in the state. This is not the case.
The predominance of predatory lending in Maine has been conducted by out-of-state, nonbank telemarketers -- not mortgage brokers.
Lawsuits against Household and Beneficial Finance entered into by various states resulted in the return of $1.6 million to Maine consumers in 2003. A settlement of $295 million in 2006, again with Maine participating, was garnered from Ameriquest, the nation's largest direct subprime mortgage lender.
Both of these companies are based outside of our state and have no ties to Maine brokers. Yet, the Press Herald editorial cited "predatory mortgage brokers" as the source of predatory lending in Maine.
Is this to say that no Maine mortgage broker has ever participated in abusive practices? Not likely. However, the exceptions hardly prove the rule.
The ranks of U.S. mortgage brokers have grown dramatically in the past 20 years.
Today, over one-half of all residential mortgages annually originated in the nation are from mortgage brokers, because they offer a greater number of mortgage products and services than are generally available at local banks.
Maine's mortgage brokers are a statewide community of over 150 small businesses comprising an effective, competitive delivery channel for residential and commercial mortgages.
Their efforts are in no small way a contributing factor to Maine having one of the highest rates of home ownership in the nation. We are not the ogres suggested by the paper.
Our organizations have long championed efforts to curb abusive lending practices through federal legislation and consumer education, and we continue to do so with current legislative initiatives before Congress.
Current efforts of House Speaker Glenn Cummings and the director of the Maine Office of Consumer Credit Regulation, William Lund, to promote legislation that will strengthen Maine's laws on predatory lending are also laudable. However, some points need to be made:
First, the problem of predatory lending must be attacked with precision. Predators need to be driven from the industry, but what is done to protect some consumers should not prevent other borrowers from full and ready access to credit.
Legislation that disproportionately affects one delivery channel (mortgage brokers), and not others (retail banks, credit unions and nonbank lenders) in effect creates an slanted playing field which can have the unintended consequences of limiting consumer access to credit.
Some provisions in the current Maine draft legislation are unfair to mortgage brokers and a potential disservice to consumers, in particular by forcing mortgage brokers to disclose compensation, but not requiring others to do so.
To this point, a 2004 study by the Federal Trade Commission clearly demonstrated that emphasizing compensation disclosures rather than consumer costs only for mortgage brokers was confusing to consumers and resulted in higher-cost loans for mortgage borrowers.
Second, the Legislature must grasp that further regulation of all Maine mortgage originators -- equally and uniformly -- is only part of the solution.
The Legislature should lend its voice to supporting efforts at federal legislation that omits no one from the requirement of fair play for consumers.
Finally, where does the discussion of consumer responsibility fit in? Subprime mortgage loans generally occur only after the borrower already has developed an impaired credit history.
Subprime mortgage lending is the last stage of a home-owning consumer's problem, not the first, and it affords a second chance for consumers to overcome life's obstacles as well as prior poor credit choices.
Our state and our society need to confront the lack of adequate consumer education that gives rise to poor credit decisions.
It is unfair to both mortgage brokers and to the homeowners we serve that any mischaracterization should arise from the predatory lending discussion.
In particular, the unintended consequences of legislation should not make getting a mortgage in Maine even more expensive for the consumer.
- Special to the Press Herald
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