While efforts to curb abusive lending practices have stalled at the state and federal levels, Chicago's City Council has passed a predatory lending ordinance introduced by Mayor Richard Daley in March.

The new law, the first such measure enacted by a local jurisdiction, requires banks that hold municipal deposits or fund city contractors to pledge that neither the institution or any of its affiliates will become a predatory lender within the city's boundaries. Institutions which refuse to sign the promise will be unable to hold city deposits.

It's a small step, but one that as yet neither federal nor state law makers have been willing to make. Although a number of stronger measures have been introduced in Congress, Sen. Phil Gramm, Chairman of the Senate Banking Committee, said recently it would be less than prudent to address the problem before the problem has been defined.

The influential Texas Republican has told federal regulators to come up with a clear definition of predatory lending. "If we act hastily to stop predatory lending without knowing what it is," he said, "we could end up cutting off legitimate loan sources and ending the home ownership dreams of millions of Americans. I, for one, am not willing to take that chance."

Chicago's aldermen were willing, though, and for good reason. A recent analysis by the National Training and Information Center, a non-profit that provides training and research on issues of concern to grassroots neighborhood groups, found that Chicago area foreclosures started by predatory lenders have catapulted from 131 in 1993 to 4,958 last year.

Chicago's law defines predatory lending by the cost of the loan to the borrower and prohibits certain practices, such as requiring monthly payments that are greater than 50 percent of the borrower's income.

It doesn't go as far as NTIC Executive Director Gale Cincotta had hoped. For example, she had been lobbying to persuade lawmakers to outlaw the practice of packing the loan with credit life insurance premiums. But "it is a first step," the nationally known activist said.

At the federal level, regulators can't even get that far. Earlier this year, Gramm asked nine agencies to define predatory lending and share their data about abusive practices. Their responses, he said the other day, revealed a lack of "coordination or shared understanding" about the problem.

The Office of the Comptroller of the Currency "does not have a formal definition," for example. And Comptroller John Hawke told Gramm that he was worried "that attempting to define this term risks either over or under-inclusion."

He wasn't alone, either. According to a report by the Banking Committee staff, none of the agencies could provide a definition and most are not quite sure what predatory lending is.

At the state level, meanwhile, only one jurisdiction, North Carolina, has enacted legislation. A similar law is still pending in New York, but otherwise, in the dozen or so other places that took up the issue this year, the question of abusive lending has either been soundly defeated or tabled.

That's good news for lenders, which favor a single set of federal rules. "A patchwork of (state) laws won't work for any of us," Robert Lotstein, general counsel of the National Association of Mortgage Brokers, said at NAMB's annual convention this summer. "It would be like driving at night with your headlines off."

NAMB supports a bill by Rep. Robert Ney, R-Ohio, which it considers a more balanced approach than other measures offered by other lawmakers or the Clinton Administration. But Sen. Gramm has effectively squashed that.

Published: September 11, 2000

Use of this article without permission is a violation of federal copyright laws.

When Lew Sichelman first started writing about housing in 1969, he was the youngest real estate writer in the country. Now, 37 years later, he's one of the oldest -- and most decorated. He has been rated the top housing columnist in the country by the National Association of Realtors as well as by his peers in the National Association of Real Estate Editors. Indeed, NAREE has recognized his work on numerous occasions. One year - due to his advancing age, he can't recall which one - he earned top honors in the annual NAREE Journalism Contest in three out of the four major writing categories. It was the first time one writer has won so many NAREE awards in a single year. Known for his ability to make even the most difficult topics understandable, Sichelman also has been honored by the National Association of Home Builders and the Mortgage Bankers Association. He began providing in-depth coverage of and consumer-oriented information about housing and housing finance at the Washington Daily News, where he was real estate editor. He held that same position for nine more years at the Washington Star, which purchased the News in 1972. The Star, a so-called "writer's newspaper" which also had the misfortune of being an evening paper, was put out of its misery in 1981, and Sichelman, who had begun self-syndicating his column in 1978, decided to become a full-time columnist. Today, his column, "The Housing Scene," is distributed by United Media to newspapers throughout the country. He also is on the staff of National Mortgage News, an independent newspaper which is considered the bible of the mortgage business. And he writes for numerous other publications, including MarketWatch.com, where he answers readers questions once a week, Sports Illustrated (don't ask), RealtyTimes.com, BigBuilder and others. Sichelman is married, the father of five and grandfather of eleven.