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Predatory
Lending
Nearly three years
ago, Governor George E. Pataki directed the Banking Department to
launch an extensive, multi-pronged approach to combat predatory
lending. In May of 1999, the Department formed an inter-divisional
task force with members of the Consumer Services Division, the Mortgage
Banking Division, the Legal Division and the Criminal Investigations
Bureau. The task force develops and implements a multi-faceted approach
to eliminate abusive lending practices in the sub prime market;
namely to educate consumers, strengthen the regulation of the mortgage
market, open criminal investigations, and conduct intensive examinations
of sub prime lenders and mortgage brokers that work within this
marketplace.
In 2001, the Department
continued to enforce Part 41, the first regulation of its kind in
the nation that targets high cost home loans. Part 41 was designed
to balance the need for credit with the need to end abuses in the
sub prime market. Through Part 41 and its multi-faceted approach,
the Department is committed to eliminating the making of unaffordable
loans that people cannot repay and the repetitive refinancing of
loans without any apparent benefit to the borrower. In late 2001,
the Department announced that Part 41 is working as reviews of the
industry have shown that since Part 41's inception the cost of sub
prime loans has come down, while sub prime credit remains available
to help New Yorkers, who do not qualify for credit from mainstream
lenders, become homeowners.
In addition to enforcement
actions, the Department has organized and participated in a variety
of consumer outreach projects to raise the visibility of the Banking
Department as a resource for consumers. Throughout 2001, the Department
participated in events at Buffalo NHS's annual homeownership fair
at Erie Community College; the "Metro Expo" for prospective homebuyers
at Madison Square Garden; a Homebuyer Fair sponsored by the United
Neighborhood Housing Program in the North West Bronx; the Hispanic
Housing Task Force Fair in Jamaica, Queens, and the State Fair in
Syracuse. The Department also hosted several forums across the state
to promote fair lending. The Department's consumer education materials
are publicly available. They include a predatory lending video in
both Spanish and English and brochures in multiple languages providing
tips on how to not lose a home due to predatory lending practices.
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