We believe: Indiana’s new mortgage broker law should weed out business practices that aren’t ethical.

In the past year, the number of home foreclosures nationwide has been a sobering and depressing statistic. Many of the foreclosures can be traced back to subprime loans, which were given out in droves by mortgage brokers.

A subprime loan is given to people with a less-than-stellar credit history. The interest rate is usually low enough to attract people. A couple of years later, the interest rate shoots up and all too often the person holding the mortgage can’t pay. When the mortgage stops being paid, foreclosure is set into motion.

Often, subprime loans are bundled together and sold to Wall Street investment firms, which see the bundles as a way for a big short-term return. But when the payments stop en masse, as has happened over the past year, the firms are stuck for billions of dollars.

Subprime lending was an insidious practice to begin with. In the past, people who were at risk of paying back a mortgage simply were denied the loans. But with the lure of quick and large returns, many jumped on the subprime bandwagon. Now it’s crashed, and politicians are scurrying to protect the investment firms from going under and to help families who are losing their homes.

One way Indiana is being proactive is through a law that went into effect Aug. 5. Mortgage brokers will have to pass new standards in order to maintain their licenses in Indiana. When Aug. 5 arrived, nearly 40 percent of Indiana brokers were barred from plying their trade because they weren’t qualified.

Local broker Darrell Baylor disagreed with the new law and requested a hearing with Indiana Secretary of State Todd Rokita. (Baylor said he also intends to do what’s necessary to become qualified under the new law.)

Among the new standards is the naming of a principal broker to oversee a company’s business affairs.

State Rep. Scott Reske, D-Pendleton, wants to go further. He proposes legislation that would do away with pre-payment penalties. These penalties are used by brokers to keep borrowers from refinancing too soon. Reske also wants to see lenders include taxes and insurance premiums in mortgage payments, so that the borrower takes into account such expenses.

All of these laws should be put into effect to protect homeowners from possible foreclosure and predatory lending practices. Facing foreclosure is sad and frightening. Indiana ranks 11th in foreclosure filings, according to Reske.

In an industry that abhors any government regulation, it’s clear that lending institutions are overdue for oversight. If such regulations had been in place, the foreclosure crisis would not have been as severe and many people who lost their homes would still be in them.

The law is clear: If a company wants to be a mortgage broker in Indiana, it has new laws to follow. If Reske gets his way, there will be even more regulation. In the long run, this should clear the way for brokers looking to do honest business by getting people into homes as opposed to those just out to make a fast buck.