Indiana Homeowner Protection Act Exempts Bankers

October 01, 2004

Indiana home buyers have new legislation to protect them from abusive lenders who prey on unsuspecting borrowers. The Indiana Homeowner Protection Act (IHOPA) is intended to curtail high-cost loans that are not in the best interest of the borrower.

The law covers loans made by mortgage brokers and consumer finance companies. Lending institutions that are already regulated—banks, trusts, savings and loans, credit unions, and industrial loan and investment companies—are exempt.

Unlike similar legislation in other states, IHOPA does not hold wholesale buyers of loans liable for purchasing predatory loans. Federal Home Loan Banks are also exempt from penalties if predatory loans are used as collateral for advances.

In addition, the law establishes a homeowner protection unit in the Indiana attorney general's office. The unit will investigate deceptive practices, institute appropriate administrative and civil actions, and pursue prosecution where appropriate. A new $3 mortgage-recording fee on all mortgages made in the state, including those made by banks, will pay for the unit.

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Bridges is a regular review of regional community and economic development issues. Views expressed are not necessarily those of the St. Louis Fed or Federal Reserve System.

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