Bankers win bid to halt bias law

Montgomery judge blocks county measure

case is to be tried in July

March 08, 2006|By LAURA SMITHERMAN | LAURA SMITHERMAN,SUN REPORTER

A Montgomery County judge blocked a fair-lending ordinance yesterday that had prompted at least two dozen lenders to announce they would stop or suspend offering mortgages and home-equity loans in the affluent county.

Circuit Judge Michael D. Mason issued the temporary injunction a day before the ordinance was to take effect. A trial on the lawsuit is scheduled for July.

The American Financial Services Association, an industry group, and several mortgage companies had sought the injunction.

They argued at yesterday's hearing that the county did not have the authority to pass the ordinance and warned that the ordinance would drive so many lenders out of the county that credit would become scarce and loan costs would increase.

Deputy County Attorney Marc Hansen said the plaintiffs were "badly misreading" the Montgomery law. "They seemed to be insisting somehow that our law is regulating lending practices and that's not what the law says," he said. "It says we are prohibiting discrimination."

In a separate development yesterday, the county law received a setback yesterday at the federal Office of Thrift Supervision, an agency under the Treasury Department that regulates federally chartered savings banks.

In response to complaints about the Montgomery ordinance, the agency's chief counsel, John E. Bowman, issued a legal opinion saying that U.S. law would preempt the county statute from being applied to federally regulated lenders.

In the meantime, the issue is expected to land back in the County Council on Tuesday when Councilman Mike Knapp said he plans to introduce legislation to repeal the ordinance.

While residents must be protected from unscrupulous lenders, legislation should not discourage conscientious financial firms from doing business in the county, the Democrat said.

"Everyone we've heard from has said there are bad actors in the mix out there, so this is not a dead issue. We just really need to specify and tailor the law to what are the problems in the county," Knapp said.

The office of County Executive Douglas M. Duncan, who is vying for the Democratic gubernatorial nomination, declined to comment on a possible repeal of the ordinance.

The County Council passed the ordinance last year to target discrimination and predatory lending practices, particularly in the market for high-cost loans that are disproportionately extended to minorities.

The law raises the maximum penalty for abusive lending from $5,000 to $500,000.

Lenders contend that the ordinance would create an uncertain legal environment and that its vagueness would make compliance difficult.

The lending industry says so-called "sub-prime" mortgages have expanded access to credit to borrowers with blemished credit histories.

More than two dozen lenders, including First Mariner Bancorp and Wall Street firms such as Lehman Brothers Holdings Inc., have suspended or curtailed lending and financing in Montgomery County.

Gene Friedman, a lawyer for First Mariner, said the Baltimore bank would resume lending in light of the injunction.

laura.smitherman@baltsun.com

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