Minnesota passes bill to curb predatory lending

CHICAGO, April 13 (Reuters) - The Minnesota Senate gave final approval on Friday to a bill that a housing advocacy group said will provide the strongest protection against predatory lending in the United States.

The bill, which passed the Senate in a 60-0 vote after passing the House on March 29, now heads to Gov. Tim Pawlenty, who will sign the measure into law, his spokesman Brian McClung said.

The measure requires lenders to verify borrowers' ability to repay a loan, prohibits loan refinancings that do not benefit borrowers, and forbids negative amortization, according to State Sen. Linda Higgins a Minneapolis Democrat-Farm-Labor Party member and the bill's chief author.

It also requires lenders to disclose when monthly mortgage payment quotes do not include taxes and insurance and caps the amount of fees and points charged borrowers, including any kickbacks from the lender to the broker, she added.

Association of Community Organizations for Reform Now or ACORN applauded the bill's passage, noting that predatory lending was a serious problem in Minnesota, where foreclosures were expected to rise dramatically in the Twins Cities area.

"These reforms are the first state legislative response to the current foreclosure crisis. ACORN members around the county will be working to see similar legislation passed at the state and federal level," said Paul Satriano, a Minnesota ACORN leader and member of the organization's national board of directors, in a statement.

Higgins said another bill still working its way through the Minnesota Legislature would create criminal penalties for falsifying mortgage information and allows borrowers a right of action to sue mortgage lenders.

Bills related to predatory lending were pending in 23 other states, according to the latest data from the National Conference of State Legislatures.