Lawmaker’s legislation ‘puts a stop to the stealing of people’s homes by so-called lenders’
OLYMPIA – Moving closer to the governor’s desk is a legislative measure sponsored by a Tacoma lawmaker that is aimed at shielding homeowners from the clutches of scam artists.
State Rep. Steve Kirby prime-sponsored House Bill 1405 in response to media accounts of people who have lost their homes to connivers. The victims have been defrauded “when they couldn’t meet preposterous terms of ill-conceived loans.
“This legislation puts a stop to the stealing of people’s homes by so-called lenders,” said Kirby, who chairs the House Business & Financial Services Committee in which the legislation was first considered earlier this year.
Here’s how these scams are visited upon desperate, unsuspecting Washington homeowners:
A homeowner on the brink of losing his or her home obtains a loan from the schemer at interest rates that are, for all practical purposes, impossible for anyone but the ultrarich to pay back. But the victim is hoodwinked into signing paperwork stating that if he or she cannot pay back the loan upon demand, the lender takes the house.
Kirby explained that the loan is written as “commercial,” not as a residential mortgage – “which makes all the difference because mortgages have interest-rate caps, consumer protections and full disclosure of all costs, while commercial loans have no such protections.
“These so-called lenders have no genuine interest at all in having the loan paid back. What these scammers want is the home. Period,” said Kirby, D-Tacoma (29th Legislative District).
State Rep. Troy Kelley, D-Tacoma (28th Legislative District), noted that “additional, vital consumer-protection provisions in the legislation make it a big win for consumers.
“The measure corrects a loophole in existing state law that allowed unscrupulous lenders to take advantage of people who needed a loan simply to ride out these tough times,” said Kelley, who is the vice chair of Kirby’s committee. “No one should ever have to fall prey to other people who are only too happy to take advantage of them.”
The measure directs that a lender cannot accept from any borrower at or near the time a loan is made, and in advance of any default of a loan, to attempt to transfer any ownership interest of the borrower’s primary residence that is used as security for the borrower’s loan.
The legislation also directs that a consumer loan-lender cannot obtain at the time of closing a waiver of future damages for usury or other damages or penalties provided by law.
Other terms of the bill modify the state’s Consumer Loan Act exemption regarding loans made primarily for business, commercial, or agricultural purposes to except loans that are secured by a lien on the borrower’s primary residence.
Victims of illegal lenders are often vulnerable and unaware of their rights. Kirby’s measure “allows the state Department of Financial Institutions to protect consumers who end up in the claws of these rip-off artists.”
The bill originally passed the House of Representatives unanimously last month, and it cleared the Senate this morning (Saturday, April 9, 2011), with only two GOP senators opposing it. Kirby said he will recommend that his House colleagues accept relatively minor Senate amendments, and then send the legislation to the governor’s desk.