Loopholes used by scammers, some lenders could be closed

As some residents struggle to stay in their homes during the economic downturn, issues have emerged with companies that charge homeowners fees to stay out of foreclosure.

 “We have had much experience with folks in that industry taking the money and not providing the service,” Ron Elwood, representing Mid-Minnesota Legal Assistance, told the House Civil Law Committee in February.

HF129, sponsored by Rep. Tim Sanders (R-Blaine), would close a loophole by requiring the same regulations for foreclosure consultants to apply to mortgage originators. The bill, passed 132-0 by the House Monday, now moves to the Senate where it is sponsored by Sen. Kevin Dahle (DFL-Northfield).

Elwood said scammers are now getting licenses as mortgage originators, who are currently exempt from regulations for foreclosure consultants in the law.

A similar loophole was also discovered with auto title lenders, who loan customers money using the title of their car as collateral. The lenders can currently obtain industrial loan and thrift licenses and make the same loans that weren’t regulated by the pawn broker statute. Passed by the House by 106-27 Monday, HF648 now moves to the full Senate where it is sponsored by Sen. Bobby Joe Champion (DFL-Mpls).

“HF648, as amended, simply says if you’re going to engage in this kind of transaction we got one set of rules regardless of who you are,” Rep. Jim Davnie (DFL-Mpls), the bill’s sponsor, said earlier at a House Commerce and Consumer Protection Finance and Policy Committee meeting.