Attorney general aspirants vow to fight mortgage fraud

An important part of the issue is educating citizens.

By Kelsey Proud

Published Oct. 24, 2008

Recent turmoil in the housing market has been blamed, in part, on predatory lending practices for mortgages, and politicians have been pressed to protect consumers.

Senate President Pro Tem Michael Gibbons, R-Kirkwood, and Sen. Chris Koster, D- Harrisonville, are this year's candidates for Attorney General, and both have plans to combat the rise of predatory lending in Missouri. They both list it as one of their top issues in their election platforms.

Koster said in his platform he wants to fight predatory lenders who take advantage of college students, seniors and the poor, but that he plans to begin with homeowners.

"The first shot that I want to take into the sub-prime lending arena has to do with home loans, sub-prime home loans and going into communities that have been taken advantage of," Koster said, "and investigating the conduct of lenders who have operated and made huge profits in this arena."

Gibbons plans to establish a statewide network that would utilize technology to alert Missourians about fraud.

"Using the media, e-mails and even text messages, consumers will be alerted to current scams, such as from contractors and home mortgage lenders, preventing consumers from falling prey," Gibbons said in an e-mail.

Current Attorney General Jay Nixon has taken several measures to fight predatory and sub-prime lending during his four terms as in office.

In 2004, Nixon and Illinois Attorney General Lisa Madigan helped to give a $54,000 grant to two metro St. Louis agencies to educate citizens about sub-prime lending. In 2006, Nixon and the attorneys general of 48 other states reached a settlement in a lawsuit against sub-prime mortgage provider Ameriquest Mortgage Co. As a result of the settlement 7,325 Missourians were made eligible for $3.6 million.

Chris Sanders, vice president of Allied Mortgage Group in Columbia, said he would like to see a system enacted by the attorney general in which all lenders are registered and their lending records are open both to consumers and the state.

"The sub-prime crisis was giving real estate loans to people who had bad credit, marginal credit, could not prove their income," Sanders said. "It was a lot of rogue lending, a lot of common sense thrown out the window because they wanted to charge the consumer a higher rate."

Sanders said that as people began to fall behind on their mortgages, it created a mess because they couldn't refinance, or go into a lower interest loan, because their credit remained the same. With a slumping housing market, he said, the previous value of their home was no longer there.

Home loans and mortgages are the primary areas affected by economic downturns, but Sanders said there might be an indirect effect on the way student loans are given because of the market conditions.

"They may want to see more of the parental financial statements," Sanders said. "It wouldn't surprise me if you see more of a parental dissection, where they want to see more of an exposure of the parents before they start lending out to everybody."

Sanders said Columbia has not been an area hit particularly hard by the crisis, but he thinks something has to be done at a statewide level to control rampant mortgage fraud.

"Missouri is one of those states where you don't necessarily need an individual license to do a mortgage loan," Sanders said. "They just take your fee and say here's your license to do business."