Pat Quinn in ‘07
Jeebus, based on a study over six months and only looking at sales,
Blagorgeous overturns HB 4050 which required risky buyers to attend financial counseling.
Lenders who complained to me about the bill claimed they made it possible for people to get loans whose credit rating made it impossible for them to get loans from banks.
They said such people might have gone into debt at one time due to unemployment or a medical problem but now were back at work and needed to borrow to repair or roof or purchase a car.
Although Madigan called them “predatory lenders,” people working at these mortgage firms claimed they were doing a public service.
So do the pay day loan operations. It doesn’t make the claim any less ridiculous.
While I am not disparaging the work of the two authors who did the study because the purpose of the study is to compare the law to that of others–the sales data in Table 2 is kind of shocking. The report is that there is a significant difference between the sales in the targeted area and the area they are using to compare. So much so that I have no idea how the two are comparable.
In the fall of 2005 the targeted areas had about 74 sales for 1000 housing units they compared (see the table for more detail–page 35). The comparison area had 18 sales out of 1000 housing units.
Let me go out on a limb here and suggest the comparison and the target populations are not the same and, in fact, have significantly different market characteristics and as such, comparisons are very difficult if not impossible to make.
The authors certainly raise important questions and I think it’s legitimate to say that they have valid points about how the targeted area was chosen, but essentially, the Governor just pulled the plug on a pilot program that has some anecdotes supporting it and some anecdotes questioning the quality of the program. To sort that out you then follow the program and evaluate it after enough time has passed.
Then again, what do you expect from a guy without an attention span. 3 months seems like 3 years. Wait, 3 months seems like 3 years watching the inevitable trainwreck of this administration unfold.
January 29th, 2007 at
Here’s how I’d fix it.
Create a fee for when financial institutions foreclose on properties. If the fee is high enough the financial institutions will do a much better job sorting appropriate risk borrowers from inappropriate risk borrowers.
January 30th, 2007 at
They are predatory lenders. Of course, the people who work at those places are going to say they’re doing a public service. The fact is, they’re solving a problem with another problem, and oftentimes a worse problem. The governor bought into the arguments made by the predatory lending industry and, I suspect, did what was good for the governor.
Carl, that’s a good enough idea, but the fee would just be passed on to the borrowers, thus taking the burden off the lenders.
January 30th, 2007 at
Marie Carnes, the cost would felt by financial institutions that had to foreclose on properties connected to bad debt.
Financial institutions that do a good job of evaluating risk of borrowers would have less cost. Financial institutions that aggressively lend to marginal borrowers would have more costs and their loans would be more expensive.
If the state set the fee high enough financial institutions would be reluctant to loan money to high risk applicants.
March 22nd, 2007 at
HB 4050 is back on and, this time it impacts ALL of Cook County, not just credit-challenged borrowers in under-served neighborhoods.
See http://www.themortgagereports.com/illinois_house_bill_4050/.