Washington bankers want the City Council to eliminate the 15 percent ceiling on second mortgages, the major item on the bankers' "wish list" now, according to C. Jackson Ritchie Jr., the newly installed president of the D.C. Bankers Association.
Because of federal law, there is no usury ceiling on first mortgages, but the federal pre-emption of local statutes does not apply to subsequent mortgages.
So-called second mortgages--loans which are secured by part of the value of houses--enable homeowners to tap the increased worth of their property, to finance home improvements or for other needs such as college expenses.
Ritchie, who also is president of First American Bank, said the City Council "recognizes" that a 15 percent usury ceiling on second or subsequent mortgages (formally called deeds of trust) during a period of high interest rates makes it difficult or impossible for banks and savings and loan associations to make such loans.
He said, however, that the council is concerned about private lenders who are "predators," and make second mortgage loans only to get their hooks into a property, "foreclosing quickly" if the borrower falls even slightly behind in repayments.
Ritchie said that at some point the bankers association, which gathered here at the Homestead resort for its annual meeting, would like to see the District usury laws rewritten, but noted that federal moves toward deregulation of banking--both on the loan and deposit side--may eliminate all state usury laws.
Ritchie also reported that the bankers' group has approved a $500,000 loan to the D.C. Community Foundation, the regional subsidiary of the Local Initiative Support Corp., a Ford Foundation-sponsored organization that will provide low-cost loans for small businesses.
Ritchie said the bankers' loan will be for 10 years at 10 percent interest. The $500,000 is half the capital the foundation is seeking from the private sector. The Ford Foundation will provide another $1 million.