OLYMPIA — Legislation was introduced today to put a stop to abusive practices made possible by disguising home mortgage loans as “business” loans.
Sen. Phil Rockefeller, D–Kitsap County introduced Senate Bill 5303 with Rep. Steve Kirby, D– Tacoma sponsoring companion House Bill 1405.
A current loophole allows lenders to make private loans secured by primary residences and claim they are commercial loans to avoid having to provide any disclosures that would otherwise be required by state and federal law when providing a loan for a primary residence.
“Currently, a few lenders of last resort have been able to charge unaware borrowers as much as they can get away to the tune of 45 percent interest rates,” said Rockefeller. “Often after the fact, these borrowers become aware of their dire arrangement and if they fail to comply with the loan agreements, the lender can take their property. These deals shouldn’t be legal in the first place. These lenders prey on individuals who could not get loans in a more conventional manner or who do not understand the full terms.”
“Scammers are very creative in coming up with ways to prey on unsuspecting people who are simply trying desperately to keep their homes,” Kirby said. “This bill plugs a loophole in the law that allows someone to make ‘loans’ that are nothing more than thinly disguised schemes to take someone’s property.”
As the law stands now, under the Consumer Loan Act (CLA), any person making a loan primary for business, commercial, or agricultural purposes is exempt from the Act.
These bills clarify that if the loan is secured by a primary residence, the person making the loan is subject to the CLA.