Enforcement of a new Montgomery County, Md., law seeking to curb predatory lending was halted for four months by a state judge Tuesday, media reports said.
Additionally, the Bush administration said the measure usurps federal authority, according to reports.
The Montgomery County Predatory Lending Ordinance seeks to curb discrimination in mortgage lending through harsh penalties against alleged predators.
Montgomery officials characterized the law as an effort to strengthen civil rights protection, reports said. But about two-dozen lenders had announced they would suspend making loans in Montgomery when the law was passed, according to reports, and the suspension of the law halted the defection.
The legislation, which was to go into effect today, would raise from $5,000 to $500,000 the maximum damages that a lender must pay if a borrower can show discrimination, reports said.
The Treasury Department’s Office of Thrift Supervision, the federal agency that regulates more than 800 savings and loan institutions, was asked by several mortgage lenders to review the county’s action, reports said. The agency’s chief counsel, John E. Bowman, wrote in a legal opinion that savings and loan institutions, which provide home loans, do not have to comply with the local law, reports said.
If legislation such as Montgomery’s were allowed to proceed, “then countless other local governments throughout the United States could do so as well, usurping federal authority to establish uniform rules,” Bowman said, according to reports.
Also yesterday, Circuit Court Judge Michael D. Mason ruled that the plaintiffs had “raised questions that are serious, substantive and fair grounds for litigation,” and ordered the county to refrain from enforcing the new law until he makes a final decision in the case after a hearing scheduled for early July, reports said.
The law’s chief backer vowed to continue his fight, reports said. “I disagree with efforts to put local governments out of the business of protecting residents from discrimination,” County Council member Tom Perez, D-Silver Spring, said, “I’m going to fight against that.”
“By requiring that lenders and all entities that service or buy mortgage loans abide by a law that contains vague definitions and subjective penalties, the County has deterred lenders from offering credit to the very consumers that need it most,” the Erick Gustafson, vice president of governmental affairs for the Mortgage Bankers Association, said in a statement. “The ordinance itself created a crisis of credit availability because it would have opened the door for frivolous and unfounded claims of predatory conduct.”
***
Send tips or a Letter to the Editor to janis@inman.com or call (510) 658-9252, ext. 140.