A recent study on New Jersey’s Home Ownership Security Act underscores the need for a uniform national standard of laws to combat predatory lending practices, the Mortgage Bankers Association said today.
The study, conducted by University of Virginia professor Richard DeMong, examined the impact of the law on the state’s nonprime or subprime mortgage lending since its implementation in late November 2003. The law was intended to address predatory lending. The study found 40 percent of New Jersey lenders and mortgage brokers have reduced the number of employees or closed offices since the law went into effect.
The study also found the law resulted in a 67.2 percent decline in nonprime cash-out refinancings and a 75.4 percent drop in nonprime home-improvement loans, negatively impacting 7.5 percent of the overall New Jersey mortgage market.
“This study confirms, yet again, what can happen in a state like New Jersey, which has the right intentions in crafting laws to eradicate predatory lending practices, but in reality fails consumers,” said Robert Couch, MBA chairman, in a statement.
He said both lenders and consumers need uniform national standard of laws that discourage abusive lending practices, while encouraging lenders and mortgage brokers to continue to make credit available to higher-risk borrowers.
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