What does the new predatory lending law do?
The 2007 North Carolina Predatory Lending Law, House Bill 1817, protects North Carolina homeowners against dangerous lending practices that put them at high risk of losing their home. Specifically, for subprime loans, the law bans prepayment penalties, prevents lenders from approving loans based solely on artificially low interest rates that the lender knows will rise, and requires verification and documentation that the borrower can make the monthly payments including property taxes and insurance. The law requires mortgage brokers to find a loan that is “reasonably advantageous” to the borrower, and changes the 1999 predatory lending law to include broker compensation (known as “yield spread premiums”) when determining which loans receive extra protections. The bill also allows the NC Commissioner of Banks to ban abusive lending practices.