Senate Bill 1167 is a critical piece of legislation that will significantly curtail predatory home lending in Cook County. This bill, which I sponsored in the House and which state Senator Jacqueline Collins sponsored in the Senate, reflects the diligent efforts of many parties through months of negotiations to reach an agreement on a practice that dramatically has affected the purchase and value of homes throughout Illinois and the nation. Now that both the House and the Senate have spoken, I ask that Gov. Rod Blagojevich sign SB 1167 now.
The newspapers are filled with stories about the collapse of the sub-prime mortgage market and accounts from home buyers who did not fully understand the terms of their loans or have the ability to realistically assess whether or not they could afford to repay them. Last year, foreclosures in Cook County increased by 50 percent and are anticipated to hit a new high in 2007. Already in Chicago, 34,818 homes have been foreclosed in the first half of this year-a pace far exceeding expectations. In my district, the effect of predatory home lending is likewise devastating.
SB 1167 includes a number of common sense reforms that get at the heart of the predatory lending problem. As so many of the troubled loans originate with mortgage brokers and bankers who use more “exotic” repayment terms, first-time borrowers and those refinancing with such entities would need to go through counseling if they take out loans that are interest-only, have prepayment penalties, could result in negative amortization or have total points and fees that exceed five percent.
While there is a counseling fee, which lenders could pass onto borrowers, though they may not for fear of losing business to competitors who bear that cost themselves, it is a small price to pay compared to the immense economic damages caused to families and communities when a home is foreclosed.
Furthermore, as one of the contributing causes to the current mortgage meltdown has been lenders who made loans without verifying income or assets, the bill would generally require that they do so.
Finally, to detect predatory lending patterns and allow the state to intervene sooner rather than later, loans subject to the requirements of the bill would be entered into a database.
We have seen for ourselves the devastation and instability predatory lending has wrought throughout Cook County. Minority and lower-income neighborhoods have been especially hard hit, adding to the challenges of those of us who are trying to build up our communities.
As it should be, the ultimate decision about whether to take a loan, should it be offered, will still be up to the individual. If Senate Bill 1167 becomes law, we can have much more confidence that decision will be made from a position of knowledge, rather than ignorance.
With a start date of July 1, 2008, there is sufficient time to prepare lenders, educate homebuyers about the requirements of the new law, and ensure a successful implementation.
To date, Congress has passed no legislation to address this issue. We believe we cannot afford to wait and that Illinois could serve as a model for other states and the nation.
We are in the midst of a crisis, one that will continue to destabilize Cook County neighborhoods if no action is taken. I respectfully request that the governor join our cause and sign Senate Bill 1167 into law.