Tennessee passes predatory lending bill

Good news from Tennessee. The General Assembly passed legislation yesterday to crack down on predatory mortgage lending practices:

The bill, called the Tennessee Home Loan Protection Act, would include loans whose points and fees payable at or before closing exceed the greater of: 5 percent of the total loan, $2,400 if the total loan is above $30,000, 8 percent if the total loan is $30,000 or less.

The bill would ban prepayment penalties after 24 months into the loan or if the loan is refinanced by the same lender. It would ban a practice known as "flipping," in which a loan is extended for an additional charge, unless there is some "reasonable benefit" for the borrower.

The bill, which passed unanimously in both the House and the Senate, represents a compromise between lenders and consumer advocate groups. Legislators say some consumers are still not fully protected and the bill may give others a "false sense of security," but that it's a "step forward." Hopefully it will set an example for other states around the South.