New bill, same debate

As Illinois senators convened to discuss gaming last week, state Sen. Jacqueline Y. Collins of Chicago left the floor, headed to Gov. Rod Blagojevich’s office and placed in his hand two letters in support of SB 1167–”her bill that would require homebuyer counseling for thousands of Cook County residents in an attempt to stem foreclosure and thwart predatory lending.

The letters represented the Illinois Legislative Black Caucus and a group of 35 area ministers’ attempt to revitalize a chameleon version of the controversial HB 4050.

SB 1167 has passed both the Illinois House and the Illinois Senate with little of the fanfare that surrounded HB 4050. Collins said that’s because the current proposal doesn’t include provisions for specific credit scores or ZIP codes and that the opposition hasn’t had enough time to poke holes in the latest version.

Still questions remain. Blagojevich himself is the biggest question mark.

Collins said the governor told her he would support her bill. But a spokesperson for Blagojevich’s office would not comment on the governor’s intention either way. The governor has until early November to decide whether to sign or veto the bill.

The governor suspended HB 4050 earlier this year, just months after the law went into effect. The legislation had been dogged by complaints that it targeted people with certain credit scores and discriminated against black and Latino homebuyers since it affected just 10 ZIP codes on Chicago’s South and Southwest sides.

Blagojevich nixed the plan after a 2006 study showed that residential property sales in the 10 affected ZIP codes dropped by half after the law was passed compared to a 20 percent decline in comparable areas unaffected by the law. The drop was attributed to “uncertainty” for lenders, “limiting their interest in offering products to consumers,” according to Blagojevich’s office.

It’s unclear how SB 1167 will affect the housing market now that the current proposal seeks to affect a larger area. “We haven’t looked into that at all. I couldn’t comment on that at all,” said Lisa K. Bates, co-author of the 2006 study and an assistant professor in the Department of Urban and Regional Planning at the University of Illinois at Urbana-Champaign.

The new bill will affect a greater number of people, all of Cook County’s more than 200 ZIP codes instead of just 10. An earlier attempt was made to approve such a measure statewide but it did not have enough support to go for a vote.

Cook County is where most of the cases of predatory lending are occurring, said state Rep. Lou Lang of north suburban Skokie. Lang said that while the proposed legislation is not an “over the top” bill, it has “enough teeth to protect consumers.”

The measure also would be permanent, unlike HB 4050 which was a test program intended to initially operate for four years. The current bill also eliminates reference to credit scores. It’s similar, however, to HB 4050 in that it only applies to homebuyers working with mortgage brokers–”often the middle-men who connect buyers with lenders–”and mortgage bankers, who do the same job but have access to a credit line that allows them to underwrite loans through other lenders. That’s what has drawn discrimination complaints from the association representing mortgage brokers.

Marve Stockert, the executive director of the Illinois Association of Mortgage Professionals, said the law is biased because it would not apply to state- or federally-funded banks. That means homebuyers could get an unfavorable loan and never be required to get counseling if they get their loan through a bank, Stockert said.

“If we’re going to regulate the mortgage industry, let’s regulate everyone who does mortgages, not parts of the industry,” Stockert said. “[The new law] is like regulating Wal-Mart but not Kmart.”

Stockert said the bill, or parts of it, is likely to get the governor’s approval because it’s based on proposals the governor recommended after the failure of HB 4050. If signed, the bill could affect 50,000 loans annually based on the fact that 1,500 people received counseling during the three months HB 4050 was in place, Stockert said.

If signed, the new legislation would require first time-homebuyers, people who are refinancing or those getting risky loans–•such as interest-only or adjustable-rate loans–•through mortgage brokers or bankers, and who live in Cook County, to get counseling before they could close on their loans.

Stockert’s group, along with others, has lobbied the governor against approving the bill. Collins said that’s one of the main reasons she’s pushing for a swift signing of the bill. “There’s an undercurrent out there who are very eager to see this legislation die,” Collins said, referring to Springfield lobbyists representing the mortgage industry. “The person who’s losing their home doesn’t have an advocate. They can’t hire a lobbyist,” Collins said. “My role is to be the voice for those who don’t have the money or high-powered lobbyists working on their behalf.”

Julie Santos, member of the Coalition to Rescind HB 4050 and co-chair of United Voices for United Families Campaign, said the new legislation is the same as the old and discriminates against Latinos, particularly undocumented immigrants who might fear deportation if they divulge personal information to a counselor. “If you’ve purchased your home 10 years ago and have to go for counseling when you need to refinance your loans, you have to give [that] information. And you don’t want to do that,” Santos said.

Santos said counseling should be through individual choice and not forced by the government.

State Rep. Karen Yarbrough, a co-sponsor of the legislation, said that counseling will be handled by certified agencies. When asked about Santos’ concerns, Yarbrough said it is up to the Illinois Department of Financial and Professional Regulation to set up specific rules, not to the Illinois General Assembly.

Yarbrough said that too many people who lost their homes to foreclosure didn’t understand the terms of their loans and that’s why the new law is necessary. “We don’t want people to get hurt,” Yarbrough said.

 

Contributing: Marine Olivesi.

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