Taking action against predatory lending

Minnesota's newly installed top lawyer, Lori Swanson has experience fighting shady lending. As an assistant attorney general, she helped win settlements against two major finance companies for less-than-ethical practices and has advised the Federal Reserve on similar matters.

That's expertise that Minnesota needs as communities across the state deal with spikes in mortgage foreclosures. So during Tuesday's inauguration it was encouraging to hear Swanson say she will work against predatory mortgage lenders who "steal the American dream of home ownership from hardworking families."

Last month, even before taking office, she wisely formed a 12- member study group to work on legislative proposals that will require verification of a borrower's ability to repay a loan; prohibit or limit prepayment penalties; restrict "churning" or refinancing loans when there is no benefit to the borrower; require more disclosure of broker compensation, taxes and interest; and improve state regulation of appraisers, closers and brokers. That group is expected to issue recommendations this month to be considered by state lawmakers this session.

Her efforts are consistent with recent action taken by federal and state banking regulators. In September, federal officials told lenders that they regulate not to make loans to borrowers who may be unable to repay. By this week, nearly half of the states and the District of Columbia issued similar warnings to banks and other lenders under their supervision.

As Swanson points out, "exotic" or subprime lending forces consumers to pay excessive costs that too often result in foreclosure. Those facing losing their homes can be victimized again by other equity-related scams as they desperately try to keep their houses. Vacant homes can further depress struggling neighborhoods. And high foreclosure rates damage the economic health of a community. Protecting consumers from those problems are excellent reasons to support efforts, at all levels, to crack down on exploitative lending practices.

FAST FACTS:

--Minneapolis had more than 1,300 foreclosures in 2006, up 79 percent from the previous year.

--In 2001, predatory mortgage lending cost homeowners over $9 billion nationally, according to the Center for Responsible Lending.