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Sharks to Keep Swimming

Industry lobbyists help sink predatory lending curbs



Unscrupulous mortgage lenders who prey on poor and uninformed consumers will continue to operate in Colorado without constraints, following the defeat last week of a proposed state law that would have reined in the worst offenders, consumer advocates say.

Despite sailing through the state Senate on a 24-8 vote, the measure -- aimed to restrict so-called "predatory loans" -- was killed by the House Information and Technology Committee in a 6-5 Republican-controlled party-line vote. Among those opposing the bill was the committee's vice chairman, Rep. Bill Cadman, R-Colorado Springs.

Supporters of the legislation, named Senate Bill 73, blamed its defeat on lobbying by the lending industry, and the influence of industry money.

"Unfortunately, they've got more money and more power than we do," said Carolyn Siegel of the Association of Community Organizations for Reform Now (ACORN), one of the consumer groups backing SB 73.

ACORN has led a nationwide campaign to curb predatory lending, a practice in which mortgage companies charge unusually high interest rates and fees and often impose prepayment penalties that make it difficult for the borrower to refinance. Such lenders tend to prey on uninformed consumers who often have poor credit.

Rep. Fran Coleman, a Democrat from Denver, took up ACORN's cause by introducing SB 73, which would have limited fees and prepayment penalties on some of the highest-interest loans. But statewide and national lenders, organized through the ad-hoc Colorado Lenders Association, said the bill would make it harder for consumers with poor credit to get loans.

The self-described "point man" for the coalition was Dave Emerick, a lobbyist for Household International, one of the world's largest mortgage companies and a prime target of ACORN's anti-predatory lending campaign. Household, based in Prospect Heights, Ill., is the company that last summer refinanced the home of Colorado Springs resident Julio Bonilla to the tune of $164,000. Bonilla's case was detailed in a cover story in the Independent ["Swimming with Sharks," Feb. 21], including his complaints that he'd been bamboozled into signing a loan that exceeded the value of his home, with an interest rate of 11.1 percent, fees totaling 7.25 percent, and a five-year prepayment penalty period.

Household has also pumped substantial amounts of money into Colorado politics. Records show that since 1994, the company and its subsidiaries have given at least $35,000 to the Colorado Financial Services Association, a main member of the coalition that fought against SB 73.

The association has passed much of that money along, in the form of campaign contributions, to state lawmakers -- including at least three of the Republicans on the House Information and Technology Committee.

Records show that committee Chairman Mark Paschall, R-Arvada, received at least $1,050 from the association since 1994; the vice-chairman, Cadman, received $450 in the last two years; and committee member Shawn Mitchell, R-Broomfield, received $350 since 2000. All three have also accepted contributions from the Colorado Mortgage Lenders Association, another member of the Colorado Lenders Coalition.

As of press time, none of the committee's Republicans had returned phone messages seeking comment.

Supporters of SB 73 still hold out hope that some consumer protections might be realized through an alternative, industry-backed bill, House Bill 1259, which was headed for a Senate committee vote Wednesday, April 24. HB 1259 would give the state attorney general the power to enforce existing federal limits on interest rates, though it wouldn't curb lending fees or prepayment penalties.

Coleman and Siegel both called HB 1259 an industry "smokescreen" but said they hoped amendments might give it more teeth.

If not, Coleman said she'll probably reintroduce similar legislation in the future. "I think we need to continue to fight for consumers."

-- Terje Langeland

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