Question:

What stipulates the Prohibit Predatory Lending Act?

Answer:

The Prohibit Predatory Lending Act is a House bill aimed at restricting predatory lending practices. Another federal bill with the same purpose is the Responsible Lending Act. Federal regulation has turned out weaker than state legislation attempts to curb harmful lending practices. Most of the states have already passed severely restrictive laws, differing on a large scale in the details, but in general providing consumers with the legal opportunity to sue predatory lenders. Just to mention, California state predatory lending laws seem to be most tolerant towards subprime lenders, which additionally supports an expensive real estate market.

However, rigid state laws are superseded by meeker Federal bills, which seems normal given the wealth of lenders and their financial incentive to shower House reps with gifts of different value.

What the Prohibit Predatory Lending Act does at all?

The Prohibit Predatory Lending Act is aimed to restrict property flipping/refinancing. Subprime lenders are prevented from recommending loan refinance to borrowers without explicitly stating costs, advantages and disadvantages of the transaction upfront. The Prohibit Predatory Lending Act also includes obligatory mortgage counseling for any high cost loan. High cost loan will be a mortgage with 8% interest rate, or higher.

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