By MICHAEL STEELEMANNEW YORK, Feb 28 (Reuters) – New York State’s personal loan system is not designed to handle the unprecedented wave of home loans being written, and the industry has struggled to manage a backlog of loans that has grown at a rapid rate, a state official said on Friday.
“It is one of the most complex loans in the state,” State Senator David Grosso, a Democrat, said in an interview.
“The way it is structured, it’s not designed for that.”
The personal loan industry has grown quickly in recent years, spurred by a flood of new homes and rising prices.
The industry has reported $7.5 billion in revenue last year, up from $2.7 billion in 2015.
The industry is under pressure to find a solution to handle a flood in the coming years, with several states seeking to overhaul their systems.
State lawmakers in recent months have proposed raising the interest rate on home loans and expanding eligibility to reduce fraud, but the issue has remained largely off the table.
New York is expected to see an additional $50 billion in loans underwritten in the next five years, a huge number that will likely require state regulators to act quickly.
A federal court has ordered New York to overhaul its personal loan program and it is possible the court will hear a case in 2018.
In a letter to the state on Friday, Grosso wrote that the personal loan debt backlog is the largest in the country, and that it is one that can only be managed if there is a plan to better manage it.
“I don’t know if you can have a loan in the industry that is structurally sound or not,” Grosso said.
The current system is broken, he said.
“You need to have an orderly and efficient way of structuring the system,” he said in the interview.
“We have no choice.”
State lawmakers passed a law in February 2016 allowing borrowers to refinance their loans at higher interest rates to offset the growing cost of living.
The legislation also made refinancing a separate loan payment option, but it has yet to go into effect.
New Yorkers who owe more than their monthly mortgage payment and are unable to refight their loan are able to refinances with a $1,000 down payment and $5,000 monthly payment.
