Massachusetts was one of the first states to put anti-predatory lending laws on its books, ratifying in November 2004. The law includes provisions for borrower counseling, prepayment penalties, and financing of fees.
Presumably, somebody thought the law had a positive impact on homeowners because, recently, Massachusetts Congressman Barney Frank authored HR 3915, The Mortgage Reform and Anti-Predatory Lending Act of 2007. Currently in debate, HR 3915 is the first national anti-predatory lending program proposed by Congress.
And then comes the heavy dose of irony.
Today, RealtyTrac released its foreclosure data from Q3 2007. Check out five of the six cities leading the nation in year-over-year foreclosure growth:
- Bethesda/Frederick/Gaithersburg, MD (1,640%)
- Cambridge/Newton/Framingham, MA (1,552%)
- Boston/Quincy, MA (1,274%)
- Springfield, MA (1,169%)
- Essex, MA (993%)
- Worcester, MA (895%)
It appears that three years after its anti-predatory lending laws went into effect, Massachusetts homes are foreclosing faster than in any other state in the country.
Geno Petro says:
Dan, You’re right. That’s some pretty ironic irony…kind of like taking out a 2nd on a 1st, of irony, that is. I hate seeing those astro foreclosure growth percentages. Interesting to see Bethesda on the list.
November 14, 2007 — 6:44 am
Chuchundra says:
I don’t know that that those numbers show much proof of anything. For example, if the ’06 foreclosure numbers were relatively small, you could see a large percentage gain YOY even if the absolute numbers were somewhat small.
To tell whether the predatory lending law was working, it would be more useful to know the actual number of homes being foreclosed upon and what that is as percentage of housing stock. It might also be useful to see the makeup of loans in MA since 2004 and see what percentage of ARMs, option ARMs, neg amorts and other non-traditional loan products there were compared to the rest of the US.
Finally, we really should have some idea of how well these anti-predatory loan regulations were enforced. Simply having these laws on the books will do nothing if there’s no consequences for violating them.
November 14, 2007 — 9:33 am
john harty says:
has the provision preventing yield spread been removed from hr 3915? i am a mortgage broker in tennessee and received info today that that provision had been removed prior to the vote tomorrow before the house. i find it very hard to find out what is EXACTLY happening on this bill. anyone with definite answers to my question, please reply.
November 14, 2007 — 9:35 am
Brian Brady says:
“Finally, we really should have some idea of how well these anti-predatory loan regulations were enforced. Simply having these laws on the books will do nothing if there’s no consequences for violating them.”
Which is the argument for no new laws; just enforce existing laws on the books.
November 14, 2007 — 10:01 am
Jim Gatos says:
I’m from Massachusetts. Let me tell you, some of the mortgage brokers and lenders in this state leave much to be desired. I’m glad some of them are leaving the state.
As for the Realtor’s role, most of the Real estate agents I see actually beg their clients not to go to shady mortgage companies. They go….
November 14, 2007 — 10:42 am
Chuchundra says:
Let me tell you a little story, Jim.
Last spring I was in a Dunkin’ Donuts, getting my caffeine fix. There were a group of young turks in there, laughing and having a good time. I paid them no mind, but as I turned to leave with my cup of joe, one of them came up to me. He was a shortish guy, mid to late 20’s with a couple days worth of growth on his face. He was attired in a black t-shirt advertising some rock band or other, faded jeans and he had a blue and white bandanna covering his head.
Anyway, he presses a business card into my hand and tells me, “I do mortgages”. And this is in New York State, where we actually have some sort of law about who gets do this kind of thing.
I tell this story to my friend who’s been a mortgage broker for over 15 years and I get a big laugh.
November 14, 2007 — 11:03 am
Robert Kerr says:
This isn’t irony; irony is unexpected.
The new law has stifled the toxic money flow, which, in turn, brings about the collapse you’re seeing.
Blaming the new law is just preposterous, Dan. It was irresponsible, toxic lending that caused this. The outcome was inevitable, with or without this new law.
November 14, 2007 — 2:32 pm
Thomas Johnson says:
What percentage of the foreclosures were originated during the past three years while the law was in effect? There’s always a variable left out, so that the spinners can spin…
November 15, 2007 — 8:24 am