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HB4050....Don't let it happen to you.

By
Services for Real Estate Pros with Nobility Partners, LLC
  


HB4050 is the short term for House Bill 4050, which was passed this past year in Illinois. The long and the short of it is this. In order to cut down on predatory lending and foreclosures, the state house thought that it would be a good idea to locate the 10 most victimized zip codes in the state and change the mortgage laws there. As it turns out, all of the zip codes are on the South side of Chicago, which is almost entirely low income black and latino population. The law requires lenders to pay for classes that the borrower must take and also outlaws certain "high risk" loans, including 100% financing and short term ARMs. Now, as a result of HB4050, lenders don't want to deal with all the hassle of lending in those areas, so many of them, including many of the smaller, sub prime lenders, have pulled out completely, refusing to lend in those zip codes. The end result? People who had a hard time getting a loan before are having an even harder time now, after the govornment tried to step in and help them. And, as we all know, if you're constantly paying rent then you're paying for someone else's home/retirement, etc,...not your own. The families in these zip codes see the bill as redlining and as one more road block in their journoy to financial freedom. If your state or local officials are considering anything of this sort, you should do everything that you can to stop them. It's too much regulation that ends up hurting the community, the investors, and the industrty as a whole. Abe

Comments (2)

Steve Leung
Silicon Valley Real Estate - Cupertino, CA

Thanks for the case overview, Abe.  It's a really unfortunate side effect of well-intentioned actions.  I'm all for educating the consumer to help them better understand the choices they face, but the way this was setup seems more like a tax that ended up discouraging business, particularly smaller ones.  Policy makers aren't always shrewd enough businessmen to understand the impact of their policies.

That said, there needs to be more education about the impact of some of the higher risk loans.  Many folks for example, don't understand the 1% neg-ams.  They can be valuable tools but they also have serious consequences.

Jan 23, 2007 04:39 PM
Joseph Sloan
Consultant - Chicago, IL

The Governor put HB4050 on hold until further notice and it may never come back.  If you have clients that are going to go in for their counseling session - CANCEL it!  The no longer have to go through that at the current time.  Just thought I should mention this.  I became aware of this on this past Monday and think that is when it was announced. 

 

Jan 24, 2007 10:26 PM