By Ivan Pereira
Two bills are in the works in the state Legislature that would curb the number of fraudulent loans that have helped cripple the housing market in southeast Queens, and housing advocates in the community said it is a much-needed help to a problem that shows no signs of subsiding.
The Senate unanimously passed two bills sponsored by Sen. Malcolm Smith (D-St. Albans) Tuesday that would crack down on lenders who cheat homeowners out of thousands and eventually force them into foreclosure.
A study issued last year found that Jamaica had one of the highest concentrations of bogus loans in the country during the last half decade.
“This trend is completely unacceptable and I am confident that my legislation will greatly impact enforcement on deceptive and abusive practices in the lending industry,” Smith said in a statement.
The first bill, S3779, would amend the state banking law to tighten the mortgage banker licensing exemption. Currently, the state prohibits people from making five or more mortgage loans in any one calendar year without a mortgage banker license from the superintendent of banks.
The senator said the mortgage scammers would get around the law by pointing people to other scammers.
Smith’s bill would not only lower the limit to three loans a calendar year or five in a two-year period, but it would also mandate that mortgage brokers solicit, process, place and negotiate mortgage loans only with a certified mortgage banker or exempt organization.
The second bill, S3781, would create provisions that would prevent unscrupulous lenders from taking advantage of homeowners. Under the bill’s provisions, the Criminal Investigations Bureau of the Banking Department will report all cases of unlicensed mortgage sales to the state attorney general’s office.
The bill also increases the penalties for unlicensed people who do financial actions.
“It will encourage and promote increased cooperation with appropriate agencies to learn of unauthorized lenders and lending practices and it will also crack down on illegal conduct to protect both the consumers and the lenders who are victimized by these practices,” Smith said.
Although the bills have a long way to go before they are signed into law, Cathy Mickens, the executive director of Neighborhood Housing Services of Jamaica, said they are a good start. The nonprofit has been dealing with dozens of cases a day of homeowners who are at the end of their rope and may face foreclosure, according to the executive director.
Southeast Queens neighborhoods, such as Jamaica, St. Albans and Springfield Gardens, lead the state in the number of foreclosures.
Mickens said the biggest problem her clients face are dealing with subprime loans that were given to them by untrustworthy lenders.
“I think we were targeted because we have a lot of small homes, we have a lot of seniors and we have a lot of people with equity,” she said. “We had a lot of people who had good credit, but they got caught up with these fraudulent mortgages because there was a lack of education.”
Reach reporter Ivan Pereira by e-mail at ipereira@cnglocal.com or by phone at 718-260-4546.
