Foreclosures Affecting Many Who Thought Themselves Invulnerable

Foreclosures continue to affect many families throughout the United States. More and more foreclosures are occurring even in wealthier neighborhoods such as Lincoln Park in Chicago. The Center for Responsible Lending estimates that one in every five subprime loans made during 2005 and 2006 will end with the borrowers losing their home through foreclosure—the highest foreclosure rate ever seen in the modern mortgage market.

State Rep. Daniel Burke has introduced legislation that would combat predatory lending. The Predatory Home Loan Act (House Bill 1478) would prohibit prepayment penalties, flipping of loans, and lender financing of credit insurance and would limit high-cost loans. The bill would bar loans unless the lender reasonably believed that the borrower could make scheduled payments on the loan. The bill would allow borrowers to obtain damages for any violations of the legislation.

The bill has a long way to go before becoming law; the House Rules Committee has not even passed it. Alone, the bill will not fix the problems that many are facing. Brokers and brokerage houses must become regulated to prevent them from offering no-documentation loans and to have them show the increased amount that borrowers have to pay on adjustable-rate mortgage loans after their teaser rate is gone. Classes for first-time homebuyers should become the norm to make sure that such buyers have all information and know all alternatives before they receive their loans.

For more information, contact Dory Rand or Patrick Hain.