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State law tightens rules on lending

August 20, 2008 3:00:36 PM PDT
A new state law now requires mortgage brokers take a closer look at borrowers.Lawmakers are tightening the rules to prevent foreclosures. It's all part of the new anti-predatory lending act.

The anti predatory lending act took effect July 1. In an effort to prevent foreclosures, it requires mortgage brokers confirm an applicants' financial stability and offer counseling for some riskier loan products.

On Wednesday, the state is sending some reminders about the new law in the form of spot inspections.

There is plenty to do in their first home.

Doug and Holly moved in over the weekend. With only five percent to put down on the home, they qualified for an interest only mortgage, meaning they are only required to pay monthly interest.

Under a new state law, that type of high risk mortgage triggers mandatory mortgage counseling. They say the extra information gave them what they needed to move forward.

"It really cleared things up," said Holly Waidanz, homeowner. "Things were 99 percent clear with just talking to my mortgage broker, which they were, they became 100 percent clear,"

On Wednesday, state examiners were checking to make sure mortgage brokers are complying with the new anti-predatory lending act.

The new law requires brokers take more steps to insure applicants are fully prepared for the responsibilities of homeownership.

"We're seeing record rates of foreclosure and fraud. So it's important that the consumers are aware and that the state is taking action to enact legislation to help protect them," said Bob Bauer, Illinois Dept. of Financial & Professional Regulation.

State examiner Bauer planned to stop by five mortgage brokers for a surprise inspection Wednesday. Throughout a two-day, statewide sweep, examiners will check 200 brokers' practices. One company on the list is American Way Financial Services

Pat Vlasis with American Way may have been surprised. But she's glad to see steps taken to improve all mortgage lending practices.

"When there's a fair playing field, I think everyone benefits. It's pretty hard when you have some programs out there that allow people to deviously get into a home and then aren't able to continue on with their home," Vlasis said.

Holly and Doug's new home had actually been a foreclosed property. Armed with extra info and extra care require by the state, they are confident they won't end up in that situation.


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