New Legislation to Prevent Abusive Lending Practices

August 19, 2007

CABARRUS COUNTY NC NEWS -- Governor Easley this week signed three bills of legislation into law reigning in abusive lending practices. The laws provide consumers with more information and protect unsuspecting home-buyers and renters from unfair fees and penalties.

These new North Carolina laws are meant to protect borrowers from abusive adjustable rate mortgages ensuring that lenders take into account the ability of borrowers to repay the loans. The laws also limit the ability of mortgage brokers to charge customers above market rates and prepayment penalties. Furthermore, the laws protect homeowners from abusive mortgage servicing companies that misapply mortgage payments, charge illegal fees and mishandle escrow accounts. The legislation also moves to clarify two recent state Supreme Court decisions that made it harder for borrowers to sue for illegal lending practices. Therefore, making it easier for borrowers to sue than would have been the case if the bill had not addressed the court rulings. Finally, if a homeowner is unable to meet the mortgage payments, loan servicers are now required to give a detailed accounting of the sums claimed to be owed, and to protect the borrower's interest during the foreclosure proceedings.

Governor Easley commenting on the new legislation said: ''Purchasing a home is the most significant, and often most confusing, financial obligation most North Carolinians will ever make. Our state has been the national leader in protecting home ownership. Our 1999 predatory lending law was the nation's first, and is still the national standard. But the volatile sub-prime lending market has presented new challenges. These new laws will give North Carolinians additional protections from unfair and deceptive lending practices. If unscrupulous lenders break the law, this will ensure that they pay the price''

The following list below of the three bills that the Governor has signed into law includes their effective dates and sponsors:

• House Bill 1374: ''An act to overturn the Shepard case and amend the limitation regarding actions to recover for usury; to overturn the Skinner case and amend the long-arm statute to allow North Carolina courts to exercise personal jurisdiction over certain nonresidential defendants; to require that a notice of foreclosure contain certain information; and to provide for mortgage debt collection and servicing.'' Most of House Bill 1374 is effective immediately, while other portions go into effect April 1, 2008. The Bill was sponsored by Representatives: Dan Blue (Dem), Jennifer Weiss (Dem) of Wake County and Margaret Dickson (Dem), Rick Glazier (Dem) of Cumberland County. The bill was carried to the Senate by Senator Martin Nesbitt (Dem) of Buncombe County.
  
  
• House Bill 1817: ''An act to protect consumers regarding covered loans and to increase the Banking Commissioner's disciplinary authority over licensees under the Mortgage Lending Act.'' House Bill 1817 becomes effective Jan. 1, 2008, and was sponsored by Representative Dan Blue (Dem) of Wake County. The bill was carried to the Senate by Senator Martin Nesbitt (Dem) of Buncombe County.
  
  
• House Bill 947: ''An act to require that notice of sale in foreclosure proceedings be sent to certain tenants residing in the property to be sold, to allow those tenants after receiving the notice to terminate the rental agreement upon ten days written notice to the landlord, to require that those tenants be given thirty days notice of an application for an order of possession, and to clarify that the proceeds in the automation enhancement and preservation fund may be used for the preservation and storage of public records.'' The Bill takes affect Oct. 1, 2007. House Bill 947 was sponsored by Representatives: Rick Glazier (Dem) and Dan Blue (Dem) of Wake County. The bill was carried to the Senate by Senator Fletcher Hartsell, (Rep) of Cabarrus County.