Some lenders won’t give mortgages in Montgomery

Companies cite vagueness of anti-predatory lending law

Friday, Feb. 24, 2006

by Janel Davis

Staff Writer

This story has been corrected from a previous version. For the full correction text, click here.

Two national mortgage lenders no longer will do business in Montgomery County, beginning today, citing the county’s recently enacted anti-predatory lending law.

The law, which takes effect March 7, is too vague, said a spokeswoman for Lehman Brothers Co., one of the companies.

Lehman Brothers and its subsidiaries are being joined by National City Mortgage. Both companies announced their decision through memos to mortgage brokers.

Lehman Brothers operates in the county through its Colorado subsidiary, Aurora Loan Services, which offers its loans through mortgage brokers. Cleveland-headquartered National City operates through First Franklin.

National City’s memo said lending in Montgomery County ‘‘is not a feasible option.”

What this means is that people who already have loans or are in the process of securing one will not be affected by the companies’ decision, according to both companies.

The County Council’s legislation is aimed at sub-prime lending agencies, which secure loans for clients with poor or no credit. Minorities make up the majority of this group and comprise most of the victims of resulting unscrupulous lending practices, said County Councilman Thomas E. Perez, the bill’s author.

The law also increases from $5,000 to $500,000 the fine that may be charged for predatory a lending incident. It also expands the categories of lending activities that constitute discriminatory practices.

‘‘The ordinance is vague, and it would be impossible to determine whether a mortgage loan was made in compliance with the ordinance,” said Kerrie Cohen, Lehman Brothers spokeswoman.

She declined to say whether Lehman Brothers had notified the county of its decision or asked for a clarification of the legislation.

‘‘We are not aware that any of these companies sought clarification of the law that we just enacted. We learned of the decisions to pull out through the press,” said David S. Weaver, a spokesman for Montgomery County Executive Douglas M. Duncan (D). ‘‘If companies do not discriminate they have nothing to worry about.”

Opponents of the legislation predicted the law would lead to a large-scale lender shortage in the county, greatly limiting residents’ choices.

Local mortgage broker and 18-year lending industry veteran Matt Zaborsky said the county is going about predatory lending the wrong way.

‘‘There are already laws that govern this. I’m wondering if it all is political,” he said.

Zaborsky owns Nor Mortgage in Rockville and has received notices that BNC Mortgage, Accredited Home Lenders and Resource Bank have all discontinued loans in Montgomery County.

Perez said Thursday that with the federal and state laws already enacted, complying with the county’s legislation should not be difficult.

‘‘The law we passed requires them to do what is already required in state law,” said Perez (D-Dist. 5) of Takoma Park. ‘‘There are so many other companies that are doing cartwheels right now because this is such an opportunity. I see a bright future in the county for this industry and this will continue to be a competitive market.”

Earlier this month, seven mortgage lenders — represented by the American Financial Services Association — filed for a preliminary injunction to stop the county from enforcing its legislation. The AFSA, citing a 2002 state law, says that the state, not the county, has the authority to establish lending laws.

The organization is awaiting a hearing date.

Correction, Feb. 27, 2006:The original version of this story incorrectly reported the amount of the fine that may be charged for predatory a lending incident. The story has been corrected.