INDIANAPOLIS A panel of state lawmakers Tuesday quickly approved a bill aimed at curbing home foreclosures by cracking down on predatory mortgage lenders. 

The bill would ramp up regulation of mortgage-only offices that currently operate with little regulation. It would require stringent national background checks on all appraisers and mortgage brokers. It would require lenders to provide borrowers a summary of how their adjustable-rate mortgages will “reset” to higher interest rates — and higher payments — in a few years. And it would require all lenders to protect borrowers’ personal information and would increase the criminal and civil penalties for mortgage fraud.

The proposal, Senate Bill 89, now moves to the full state Senate for consideration.

Indiana was recently ranked ninth in the nation for the number of home foreclosures in November, according to RealtyTrac. Experts have attributed the nation’s home-foreclosure and subprime-lending crisis in part to unethical lending practices by some brokers, who made mortgage loans to high-risk borrowers who could not pay when the loans reset to higher rates.

The bill’s author, state Sen. Connie Lawson, R-Danville, described the bill as an effort to tighten up regulations on mortgage brokers by increasing the amount of authority afforded the Indiana Secretary of State’s Office, which regulates those brokers.

Lawson said the bill is the result of the Interim Study Committee on Mortgage Lending Practices and Home Foreclosures, a summer study committee that heard hours of testimony on predatory lending from housing officials, state police and banking experts.

During hearings last summer and fall, witnesses told of unregulated mortgage brokers who would lend money to people who did not understand that when interest rates would re-set to higher rates, their monthly house payments would increase, too.

Indiana Securities Commissioner Chris Naylor, who heads the secretary of state’s oversight of the state’s mortgage-broker industry, said the bill gives the securities division more of the tools it needs to protect borrowers from predatory lenders.

Lobbyists for the Indiana Association of Mortgage Brokers and the Indiana Association of Mortgage Bankers said Tuesday that they support the bill, although Lawson later said the mortgage bankers are concerned about some wording that might prevent them from getting credit reports. Lawson said she hopes those issues will be hammered out soon, as lawmakers move to alleviate those concerns.

Senate Bill 89 quickly passed out of the Senate Committee on Corrections, Criminal and Civil Matters on Tuesday, with a unanimous 7-0 vote.

Lawson said she had personal experience with one provision of the bill: personal identity information showing up on publicly recorded land documents.

“My county recorder came across a document where my Social Security number and other information had been recorded for a number of years, and she shared that with me,” Lawson said.

She said she thinks the bill will help decrease Indiana’s high rate of foreclosures, and said the bill has a “great chance” of becoming law.

A related bill has been introduced into the Indiana House. House Bill 1211 imposes new regulations on sales disclosures for mortgage loans, so that buyers are notified of the homestead deductions and credits to which they may be entitled.

Courier & Press staff writer Bryan Corbin contributed to this story.

http://courierpress.com/news/2008/jan/16/bill-targets-mortgage-practices/