The Massachusetts House of Representatives sent a strong and clear message to those who practice so-called predatory lending by giving its approval on Wednesday to the first-ever statewide bill to stop such activity here in the Bay State. The bill, which has been in the works for some time, now needs the approval of the state Senate and Gov. Mitt Romney to become law. Rep. John Quinn, House chairman of the Joint Committee on Banks and Banking, has said he believes both the Senate and the governor will quickly approve the measure.

Bay State lawmakers say the bill targets mortgage lenders who use aggressive techniques to sell high-interest, fee-laden loans to inexperienced, fiscally vulnerable borrowers. The legislation had to undergo a number of rewrites, however, in part to ensure that business conducted by a great number of legitimate subprime lenders who fulfill a needed role by lending to homeowners and homebuyers with less-than-perfect credit, usually at a higher interest rate than a conventional loan, is not unduly curtailed.

Key elements of the bill include: requiring lenders to certify that a mortgage is in the best interest of the consumer; mandating third-party reviews of any high-interest loan before a customer signs off on it; limiting fees on high-cost loans to 5 percent of the mortgage principal; and banning prepayment penalties on high-interest loans.

Groups that have voiced enthusiastic support of the bill – which Quinn has described as “landmark legislation” – include the Massachusetts Mortgage Bankers Association, the Massachusetts Mortgage Association and the Massachusetts Association of Community Organizations for Reform Now, or ACORN. Banker & Tradesman, which always has advocated for stricter regulations against predatory lending practices, can be added to that list. The bill is long overdue, and we applaud the House of Representatives for standing up for the rights of borrowers throughout Massachusetts.