Lending bill to get public hearing

Measure that targets property flipping faces City Council skepticism

January 18, 2001|By John B. O'Donnell and Gady A. Epstein | John B. O'Donnell and Gady A. Epstein,SUN STAFF

The City Council's initial attempt to curb lenders who finance property flipping and other high-cost loans to homeowners gets its first public airing today amid indications that the bill faces a bleak future.

The aim of the bill, introduced in September, is to limit costly features of loans, including balloon payments, prepayment penalties, single-premium credit insurance, high interest rates and quick refinancing of loans. It applies to mortgages that finance home purchases, refinancing of mortgages and other loans where a house is used as security.

But the measure faces severe skepticism or downright opposition across the board, from Mayor Martin O'Malley and Council President Sheila Dixon to the state bankers association, the city housing department and housing activists.

The bill was introduced by 4th District Councilman Keiffer J. Mitchell Jr. at the urging of the Association of Community Organizations for Reform Now. ACORN complains that the measure is not strong enough.

Seventeen of Mitchell's 18 council colleagues signed on as co-sponsors. But Mitchell said yesterday that only three of his colleagues are committed to voting with him for the bill.

O'Malley said he believes that the bill could have a "chilling effect" on lending in the city and hopes the council decides that the bill as written isn't necessary.

"What all of us are trying to do is to get banks to loosen up credit in the city of Baltimore for people to buy homes or start businesses or expand businesses, and what worries me about this bill is that it may have the opposite effect," O'Malley said.

The mayor said he believes that the banking industry has gone to "great lengths" to address predatory lending practices, and "I hope when council members hear that, they might be satisfied with that."

Dixon, one of the co-sponsors, expressed doubts about the bill, too.

"It may be the case that local legislation doesn't add anything to what already is being done" at the state and federal levels, she said, speaking through Jason Young, her press secretary.

Mitchell said he has been told by the City Law Department that the city can't legally regulate the lending industry, which is regulated by the state and federal government.

Critics of the measure said many of the practices targeted in the bill are already illegal under anti-fraud laws. They echoed O'Malley's reservations.

"I'm seriously worried about the banking community, that they're going to say, `Forget Baltimore,'" said Vincent P. Quayle, head of the St. Ambrose Housing Aid Center, who opposes the bill.

The bill would prevent the city from doing business with lenders that make the kinds of loans specified or have subsidiaries that make such loans. The city would not be able to invest pension funds or deposit municipal funds in those institutions. And it wouldn't provide settlement expense loans to homebuyers who get mortgages from such institutions.

Lenders in most property flipping cases in Baltimore would not be covered by these provisions because they don't do business with the city. Many of them are out-of-state businesses.

Glenn T. Scott, an ACORN official, said his organization isn't aiming to regulate lenders, but rather, to control the use of city funds. "The city has every right to regulate city funds," he said.

Added Mitchell, "It definitely needs a lot of work, some fine-tuning. ... At least we've put the issue on the front burner."

The public hearing begins at 5 p.m. today at City Hall before the council's Housing, Health and Environment Committee.

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