Progressive Groups Diverge on Mortgage Legislation, SB 57

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With additional repoting by Matthew Cardinale.

(APN) ATLANTA — Various notable groups within Atlanta’s progressive community appear to have come to very different conclusions about SB 57, a bill currently in the State Senate which would change laws regarding mortgages in Georgia.

Georgia Watch and Georgia STAND-UP are supporting the bill, while the Atlanta Fighting Foreclosure Coalition (AFFC) is not.

Georgia Watch rallied downtown Friday, December 04, 2009, in support of the bill which aims to protect consumers from abusive lending practices. Georgia STAND-UP had also sent out an email in support of the bill.

Barbara Joye of the AFFC also sent out an email regarding the December 04 press conference, later sending a clarification that the AFFC was not endorsing the bill.

SB 57 is also known as The Georgia Fair Lending Act.

The original sponsor is State Sen. Bill Hamrick, a Republican. Co-sponsors include State Sen. Nan Orrock, a notable progressive; former State Sen. Kasim Reed, who is currently Mayor-elect of Atlanta; and State Sens. Ed Harbison, Ralph Hudgens, and Ed Tarver.

However, another progressive elected official, State Sen. Vincent Fort–a member of the AFFC–criticized the bill for several reasons, starting with the fact that it was sponsored by a Republican.

“We have a major, major issue with lending in this state,” Danny Orrock, Deputy Director of Georgia Watch, said. “We have to do something to ensure lenders don’t continue to make the choices that led us into this mess.”

Incidentally, Danny Orrock is the son of Nan Orrock, one of the co-sponsors of SB 57.

Danny Orrock noted 10,000 foreclosed homes land on the auction block in Fulton County every month. As a result of so many people losing their homes, Georgia ranks number seven in the nation for foreclosures.

“The consequences of careless lending are real and they are broad,” Orrock said, noting foreclosures lead to stressed and broken families, lost jobs, and vacant properties.

The State predicts 350,000 more homes will go into foreclosure through 2012, Orrock said. “This problem is not going away any time soon.”

ARGUMENT FOR THE BILL

Georgia Watch argues Senate Bill 57 is a good solution to the problem for several reasons.

“It would ban prepayment penalties on subprime loans. We shouldn’t have a disincentive for people wanting to get out of high risk loans,” Orrock said.

The bill would ban broker “yield spread premiums” on subprime loans, or what Georgia Watch characterizes as broker kickbacks.

Orrock said the legislation would designate mortgage brokers as agents of borrowers so that the brokers “act on behalf of the borrower, not the lender.”

“You want to get the best rate you can possibly get,” he said. “You don’t want to line [the lenders’] pockets.”

Additionally, SB 57 would require lenders determine borrowers have the ability to repay a loan before they get one. Orrock said this is “the single most important thing we can do.”

The description of the bill on the Legislature’s website seems somewhat different; and a new version of the bill is expected to be introduced this Session because the State House recommitted the legislation last Session.

That description reads: “A BILL to be entitled an Act to amend provisions of the O.C.G.A. relating to mortgages, foreclosures, and evictions; to amend Chapter 6A of Title 7 , relating to the “Georgia Fair Lending Act,” ; to amend Code Section 15-6-77 of the ,[sic] relating to fees to be collected by clerks of the superior courts, so as to provide for fees for filing documents pertaining to a deed under power more than 30 days following the exercise of a power of sale in a mortgage, security deed, or other lien contract; to amend Code Section 44-7-55 , relating to the writ of possession, so as to provide that a tenant with a valid lease can stay in a foreclosed property for 60 days; to amend Article 7 of Chapter 14 of Title 44 , relating to foreclosure on mortgages, so as to provide for examples of when an instrument of conveyance will be an equitable mortgage; to repeal conflicting laws; and for other purposes.”

Providing protections for renters affected by foreclosed properties would be one of the strengths of the bill if it is included in the new version. Atlanta Progressive News first reported in 2007 on the fact that rent-paying tenants can currently be evicted if their landlord fails to pay the mortgage.

ARGUMENT AGAINST THE BILL

“The organization that’s pushing it is the Center for Responsible Lending, that was created by predatory lending money from Golden West–which was bought by Wachovia–a notorious predatory lending company that was founded with billions of dollars of predatory lending money,” Fort said.

“They collaborated with Fannie Mae and Freddie Mac to put in place predatory lending across the country. This is an organization that is out here that was going around the country trying to push through any predatory lending legislation they can,” Fort said.

“They circumvented the Black Caucus last year to support a bad piece of legislation that will not do anything to stop predatory lending,” Fort said.

“It doesn’t have third party liability,” Fort said. “What happens in these transactions, when somebody gets in a bad loan, the financial institution that they give the bad loan to sells the loan to Wall Street immediately,” Fort said.

“When a person who gets a bad loan wants to sue to somebody, the bank says, we sold it to Wall Street. But the person they sold it to says, we didn’t do any of that,” Fort said.

When asked about the positive aspects of the bill referenced by Danny Orrock, Fort said, “What he doesn’t tell you is it doesn’t include any third party liability. If you don’t have third party liabilities, the fact is you can’t enforce any of that stuff,” Fort said.

“If you can’t sue the person who’s screwing you, you can have all the prohibitions in the world but you can’t find any redress to your grievances,” Fort said.

“The irony is, Center for Responsibility had a person from North Carolina here saying third party liability was a bad thing and they didn’t need it. Then their person testified in Congress that without third party liability, any law Congress passed would be bad law,” Fort said. “So it’s hypocrisy from the Center for Responsible Lending.”

“We offered amendments on the Senate floor to a bill that was even worse and they voted out,” Fort said. “I introduced alternative legislation. Republicans would not even let it out of Committee.”

SB 57 moved well through the Georgia General Assembly in 2009, receiving broad, bipartisan sponsorship while passing the Senate 43-9.

Those voting nay included State Sens. Robert Brown, Gloria Butler, Gail Buckner, Vincent Fort, Lester Jackson, and Horacena Tate.

Last Session, the bill passed one House committee before stalling in the House Rules Committee at the end of the session. The bill was recommitted by the House, according to the legislature’s website.

Georgia Watch said the bill will likely end up before the House Non-Civil Judiciary Committee when the new session starts in January 2010.

About the author:

Matthew Cardinale is the News Editor of Atlanta Progressive News and is reachable at matthew@atlantaprogressivenews.com. Jonathan Springston is a Senior Staff Writer for Atlanta Progressive News and is reachable at jonathan@atlantaprogressivenews.com.

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