North Carolina Mortgages
In 1999, North Carolina was the first state in the nation to pass a law addressing the practices of predatory lending. The legislation included of necessity an attempt to define the characteristics of predatory lending. Those included providing loans with excessive prepayment characteristics; providing refinancing packages that result in nothing more than additional points and profits for the lender; lending based on collateral rather than the borrower's ability to pay; and providing loans without sufficient explanation of the terms and conditions.
It is difficult to define where the line is between predatory lending and aggressive marketing tactics. North Carolina attempted to do so, however, and nine years later many states and the Federal Government are looking to the North Carolina legislation as a baseline for additional legislation.
It has been argued that the prohibitions included in the North Carolina mortgage legislation has made it more difficult for subprime borrowers to obtain loans. While the law has tightened some marginal lending practices, it has in general been judged a success. The true excesses in subprime lending reached the epidemic state in the five or six years after the bill was signed into law. It is possible that the legislation saved a number of North Carolinians from going through the default and foreclosure miseries that are climbing steadily throughout the country.
Studies of the North Carolina predatory lending law suggest that while it was followed by a reduction in subprime lending there was also a reduction in subprime applications for credit. The conclusion was that the reduction was the result of decreased demand. One fact that was revealed by these national comparisons is that California alone accounts for about 33% of the subprime lending in the country - or did two and three years ago.
North Carolina continues to enjoy a healthy growth rate. Moreover, the industries moving into the state are a good mix of technology oriented firms along with industrial companies that require substantial numbers of employees. Home sales in North Carolina remain brisk and the North Carolina mortgage market remains healthy. While some lenders did depart the state after passage of the predatory lending legislation, none of them were major lenders in the state or among the top twenty nationwide.
People seeking a North Carolina mortgage have had some protection against excessive fees, prepayment penalties and refinancing schemes. State officials feel the impact of the legislation has been positive. There are still ample sources for subprime mortgages in the state - but what the law has provided is some protection for people who might otherwise get in over their heads.
