ABA: State Predatory Laws Premature

State and local laws aimed at curbing abusive lending practices are premature and potentially harmful, according to a report released by the American Bankers Association.Robert Litan, vice president and director of the Brookings Institution's Economic Studies Program, argues in the report that the effects of recent federal measures need to be monitored before taking further action. "There are better and more targeted ways of attacking predatory lending without restricting the mortgage market," Mr. Litan said. "Federal legislators and regulators have taken action to target and root out loans that are clearly predatory, while ensuring that mortgage loans remain available to subprime borrowers." Those measures include disclosure requirements, the prohibition of certain mortgage provisions, and incentives to serve low-income and minority borrowers. "With a new federal regulatory regime in place, it is too soon to know whether the predatory lending problem requires new state legislation, or more intense enforcement of existing federal laws," he said. Mr. Litan criticized an AARP campaign urging states to adopt model legislation that would further limit the terms of mortgage loans, contending that it is based on evidence that is several years old. The ABA can be found online at http://www.aba.com.