ARIZONA STATE SENATE
Phoenix, Arizona
REVISED
home loans; prohibited
activities.
Establishes
the Joint Study Committee on Home Loan Practices to review and contrast current
practices in the high cost home loan market in Arizona.
Background
The home loan or
mortgage market in Arizona is a complex market in which lenders use a variety
of tools to measure their risk when they lend money to consumers. Also, these lenders engage brokers to sell
their money products to consumers and utilize incentives to encourage the sale
of one particular product over another.
When a consumer has chosen a product, there are costs associated with
purchasing the money to buy a home that include origination fees, title,
appraisal, underwriting fees and associated costs with processing the
loan. These costs may fluctuate
depending on the terms of the loan being sold.
While
consumers’ with adequate income-to-debt ratios and better-than-average credit
enjoy a wider variety of lower cost loans, those with less-than perfect credit
or other issues may require what is described by industry as a sub-prime
loan. The industry argues that these
loans make money available to segments of society that are underserved. Critics argue that, when the sub-prime
mortgages charge either an exorbitant interest rate or abnormally high closing
costs, the loan moves from a sub-prime loan to a predatory loan. These individuals argue that the loans at
best are aimed at an ill-informed public or, at worst, constitute fraud by
those selling the loans or lending the money.
Other factors may play into whether a predatory loan situation exists. No universally accepted definition of
predatory lending practices exists in Arizona, and arguably not in the United
States, although other governments have passed legislation regulating predatory
lending practices.
This measure establishes the Joint Study
Committee on Home Loan Practices to review and contrast current practices in
the high cost home loan market in Arizona.
Under
this measure members are eligible for reimbursement of expenses but not for
compensation.
Provisions
1. Establishes the 13-member Study Committee to examine:
a)
Current
practices of lenders of high cost home loans.
b)
Points
and fees charged.
c)
Prepayment
penalties, balloon payments, negative amortization, advance payments and
default rates.
2. Requires a recommendation from the Committee of a plan to improve lending practices for high cost home loans that reduce the risk of default or foreclosures.
3. Allows the Committee to use Department of Banking and legislative staff for technical assistance.
4. Requires the Committee report their findings and recommendations to the Governor, the President of the Senate and the Speaker of the House of Representatives no later than December 15, 2002.
5. Repeals the Committee on December 31, 2002.
6. Provides for a general effective date.
Amendments Adopted by Committee
·
The
strike everything amendment was adopted.
Senate Action
BI 3/14/02 DPA/SE 4-1-1-0
3rd Read 3/27/02 18-12-0-0
Prepared by Senate Staff
April 5, 2002