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Although we do recognize the at times predatory nature of wraparound mortgage lenders, we also acknowledge the fact that this is an issue created by government. Both state and federal governments have created, subsidized, and incentivized individuals borrowing more than they should or have the means to repay. Then when they find themselves in financial turmoil, they turn to anyone who appears to be able to help them out of the predicament they find themselves in. This has led to predatory and unsettling practices such as wraparound mortgages that can result in people losing tens of thousands of dollars and their home.
Seeking to address this issue is admirable. However, in so doing this bill would create significant levels of new bureaucracy which concerns our principle of limited government. And though not the wisest tool, not all who provide wraparound mortgages are bad actors or have ill intentions. This bill would have the effect of bringing well intentioned businesses new burdens and penalties. It would also infringe on our principle of personal responsibility by shifting the burden of the individual to understand what they are signing and agreeing to away from the consumer and onto the provider.
If this bill were amended to only include the provision closing the current loophole (Section 1) and the requirement that all who have an interest in the property be notified and consent to the wraparound mortgage, we would withdraw our objection. Requiring that all who have a legal interest in the property be notified and agree to the wraparound mortgage before it can be entered into is a good provision that would uphold our commitment to both personal responsibility and property rights
For these reasons, as the bill stands, we must oppose SB 1994.