It’s time for Maine to stop predatory home lenders

The holidays and coming of the New Year are times we celebrate the comforts of home and family. A home is perhaps the single greatest asset a family can have – but unfortunately, too many Mainers are finding out just how fragile the gift of a home can be.

Increasingly, Maine homeowners are the targets of unscrupulous and predatory home lenders, and the results can be disastrous for the families who fall victim.

Maine has become a tempting marketplace for large out-of-state predatory lenders who target borrowers directly, or provide the financing through local representatives. Our unique combination of high home ownership, moderate incomes and one of the oldest populations in the country all spell big profits for predatory lenders looking to take advantage of people who have valuable home equity, but little cash on hand.

Predatory lenders attract consumers with promises of low rates or payments, and use unconscionably high fees, hidden clauses and treacherous fine print to strip the equity from a home and increase the likelihood of foreclosure. Even the most astute consumer can be trapped in a loan that is designed to send them spiraling into debt and could cost them their home.

Unfortunately, Maine’s current laws do little to protect homeowners from the rising tide of predatory lending.

Today, Maine has the sixth-highest rate of home ownership in the country, but our tradition of home ownership is threatened. Predatory lending is helping to drive an increase in home foreclosures nationwide, and Maine now also holds the regrettable distinction of having the highest rate of home foreclosures in New England.

Nationwide, predatory lending is becoming an epidemic that is generating huge profits – growing from a $34 billion to a $500 billion industry in just the last decade. And here in Maine, recent studies show predatory lending is taking an estimated $23 million from the life savings of Maine seniors, workers and families each year.

Maine consumers and homeowners aren’t the only casualties. Responsible lenders – like our local banks, credit unions, and mortgage brokers – also suffer as a result of the booming predatory lending trade. While these lenders work with consumers to put forward responsible loans that service the individual and the community, they operate at a disadvantage when large out-of-state predatory lenders lure customers away with empty promises.

Right now we have a unique opportunity to do what is fair for Maine families, and what is right for the local economy by putting in place new laws that will level the playing field for responsible lenders and protect Maine homeowners from predatory lenders.

As speaker of the Maine House and as a mortgage broker, we are working with local mortgage brokers, banks and credit unions in an effort to change Maine laws and to close the loopholes that allow predatory lending.

This session, the Legislature will consider new legislation to combat predatory lending in Maine. The bill, An Act To Protect Maine Homeowners from Predatory Lenders, would outlaw the most egregious predatory lending practices, and prevent the practice of using excessive fees to drain equity from Maine homeowners.

The legislation would eliminate so-called “binding arbitration” clauses in mortgage contracts that deny consumers any right to the courts if they are abused by a predatory lender. It would restrict prepayment penalties, which predatory lenders often use to charge consumers thousands and even tens of thousands of dollars just for paying off their loans early or refinancing.

The bill would also outlaw a predatory practice known as flipping, where lenders convince borrowers to refinance unnecessarily – or even against their best interest – to generate thousands of dollars in fees for the lender, who simply tacks the cost onto the debt of the consumer.

The legislation would also put in place much needed consumer protections that would reduce the amount of fees a homeowner can legally be charged; provide better education and disclosure for Maine consumers; and effectively level the playing field for responsible Maine lenders.

There should be little debate that our current laws do a disservice to the families who lose their homes at the hands of a predatory lender. States across the country like Massachusetts, North Carolina and New Mexico have already passed similar legislation to protect their citizens – and Maine should not fall behind.

When a family loses its home in Maine, we lose an important piece of our community.

Few things are as important as protecting the homes and financial security of Maine families – and it is something that Democrats and Republicans are equally committed to. It is our hope that members of the public and lawmakers from all parties will step forward this session to make sure the Mainers in their communities will not be the next victims.

Glenn Cummings of Portland is the speaker of the Maine House of Representatives and is the prime sponsor of the Act to Protect Maine Homeowners from Predatory Lenders. Kathy Crossman is the sole owner of Independence Lending Group, a local mortgage brokerage and consulting firm in the Bangor area.