New loan regulations under review

As the subprime crisis has continued to worsen, efforts to strengthen regulation of mortgage lending have increased in Washington and nationally.

Last year, the state instituted a requirement that loan originators be licensed and pass a background check. More recently, Gov. Christine Gregoire encouraged a task force studying the mortgage crisis to consider even more changes.

Congress also is considering possible regulations. One would shift more responsibility to mortgage sellers, requiring them to determine whether potential borrowers have sufficient income to repay their loans, particularly if monthly payments increase sharply over time. Lenders also would have to show that the homeowner would benefit from the loan.

Some states have tried for years to curb what they consider predatory lending.

Twenty states outlaw so-called "loan flipping," or refinancing a loan that has no benefit for the borrower. Seven have outlawed prepayment penalties, and 25 ban mortgages with provisions that increase, rather than shrink, debt over time. At least 26 states require lenders to consider a customer's ability to repay the loan before they approve the transaction, according to the National Conference of State Legislatures.

None of those protections applies in Washington.

So far, rates of mortgage delinquency and foreclosure are lower here than in other states, but consumer groups warn the situation is likely to worsen over the next year as interest rates rise on larger numbers of loans.

— Susan Kelleher