April 19, 2005
Historically, Iowa has enjoyed a high rate of home ownership, but that achievement is threatened by predatory mortgage lending. Our office has placed a high priority on combating practices that drain hard-earned equity from vulnerable families. Though Iowa has not enacted specific legislation, we have been able to rely on existing state laws to curb abusive lending. One notable example is Iowa's longstanding ban on prepayment penalties. We were among the states that fought hard to reverse the federal agency regulation preempting that prohibition and other significant lending laws to protect our citizens. Because we were successful with that effort, today borrowers in Iowa can safely avoid the pitfalls of prepayment penalties, which too often trap families in high-cost loans and penalize them for improving their credit.
Predatory mortgage lending remains a serious concern in Iowa and elsewhere. Congress is being offered two competing visions of the federal government's role in addressing this problem. One proposal would set a federal ceiling, and, in doing so, broadly preempt state laws addressing virtually all aspects of mortgage lending. It would even roll back important rights and remedies for consumers in existing federal laws, while prohibiting states from plugging obvious loopholes. The other vision is offered by Congressmen Miller, Watt and Frank. Their proposal would raise the minimum standard of practice, while ensuring that states can continue to address the problems that arise in their own backyard.
Predatory mortgage lending imposes heavy and unnecessary costs on home buyers and homeowners. A federal ceiling favors sub-prime lenders' desire for fewer restrictions and greater convenience. A federal floor provides the best protection for consumers while supporting a healthy business environment. We commend Congressmen Miller, Watt and Frank for offering a well-balanced bill that places the highest value on the economic security of families and communities.