LA Mayor Signs Anti-Predatory Law

Los Angeles Mayor Jim Hahn signed an anti-predatory-lending ordinance Dec. 18 designed to address high-cost refinance home loans.The ordinance defines such loans as having an annual percentage rate that “exceeds by more than six percentage points the yield on the Treasury Securities having a period of maturity typically used by the lenders within the industry as the basis for home loans.” The Los Angeles Housing Department will annually designate the period of maturity “typically used” for home loans in the rules and regulations. Also captured under the ordinance will be refi loans whose points and fees exceed four percentage points of the total loan amount. However, a refi with points and fees up to $1,500 will not be subject to the provisions. Practices prohibited under the ordinance include: mandatory arbitration clauses without full disclosure; lending without home loan counseling; and lending without reasonable belief in the borrower’s ability to repay the loan. The ordinance will also affect the secondary market, stating that a purchaser of a refi loan is subject to "all claims, actions, and defenses related to that high cost refinance home loan that the borrower could assert against the original lender.”