SB 57: Mortgage Reform

General intent:

SB 57 addresses financial incentives that brokers and others use to guide borrowers into unsuitable loans. The bill helps prevent factors that contributed to meltdown in the subprime market.

Specific provisions:

1. Bans prepayment penalties on subprime loans. A high-cost loan should be a bridge to better financing, not an anchor to high-interest debt.
2. Bans broker “yield spread premiums” (aka broker kickbacks) on subprime loans.
3. Designates mortgage brokers as agents of borrowers.
4. Requires that lenders determine that the borrower has the ability to repay for subprime loans. This will help keep people from entering into loan agreements that they cannot afford to repay.
Stability for the Future:

This legislation is meant to protect buyers and neighborhoods. The point of SB 57 is to restrict lending practices that are either by intent or effect predatory.

Foreclosure is bad for the borrower and the lender, and also hurts neighborhoods by leaving properties vacant and reducing home values. Local governments then have difficulties raising revenue and enforcing the property code. By putting common sense underwriting standards into law SB 57 will reduce foreclosures and ensure that the housing market in Georgia is stable.