In the wake of Standard & Poor's recent announcement that certain loans falling under the Georgia Fair Lending Act (GFLA) will not be allowed in S&P-rated loan pools, several mortgage lenders have publicly announced that they will pare down or halt all lending activity in that state, setting a precedent for what other states can expect if similar legislation is enacted. The news stunned the originator market, and led to Georgia-originated loans being pulled from pending transactions and at least one investor backing out of priced transactions that had yet to settle.

Observers are concerned because similar anti-predatory lending laws are due for implementation in states such as New York (expected to take effect on April 1) and New Jersey, which make up a much greater portion of non-conforming securitized loan portfolios. Analysts at S&P stated that they are currently looking into the anti-predatory lending legislation in these states as well. Using its proprietary loan-level database, Banc One Capital Markets estimates that average loan exposure to Georgia among sub-prime mortgage lenders is just 3.3%, the lowest exposure being just 0.92% and the highest at 5.5%.

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