AFFIL Board member Kathleen Engel is moving from Cleveland to Boston, where she will join the faculty at Suffolk University Law School – just a few blocks from our offices. She is making the actual move next week and won’t start teaching until September, but she’s already appearing in our local news as a Suffolk professor with expertise on predatory mortgage lending.
The Boston Globe quotes Engel on the national importance of a pair lawsuits filed in federal district court in Massachusetts. Boston attorney Gary Klein is seeking to hold Bank of America and Wells Fargo responsible for “toxic” mortgage loans made to Massachusetts borrowers – loans that the lenders knew the borrowers would be unable to repay. (The loans were originally made by Countrywide Home Loans and World Savings Bank, lenders subsequently acquired by BofA and Wells Fargo.)
The claims are based, in part, on the Massachusetts Unfair and Deceptive Practices Act, the same law that Massachusetts Attorney General Martha Coakley used successfully against failed subprime lender Fremont Investment & Loan. In that case, a unanimous decision by the state’s Supreme Judicial Court last December strongly affirmed a lower-court ruling that thousands of Fremont’s loans were “presumptively unfair” because they had “characteristics that made it almost certain the borrower would not be able to make the necessary loan payments, leading to default and then foreclosure.”
In making those loans, Fremont considered the borrowers’ ability to make payments only during a three-year initial period, even though they knew that after that time the monthly payments would jump sharply upwards to a level that the borrowers could not possibly repay. The only way that a borrower could escape foreclosure was under the unrealistic assumption that housing prices would continue to increase rapidly; in that case the borrower could refinance into another unfair mortgage with deceptively low initial payments – generating a second round of hefty fees for Fremont.
Professor Engel is right that if these cases are successful – as they should, given the powerful evidence and arguments that are offered – they “will be a model throughout the country.” Many other predatory lenders have cause to be worried.
AFFIL Board Member Illuminates “Toxic” Mortgage Lending Case
Image: of Kathleen, from our board page
AFFIL Board member Kathleen Engel is moving from Cleveland to Boston, where she will join the faculty at Suffolk University Law School – just a few blocks from our offices. She is making the actual move next week and won’t start teaching until September, but she’s already appearing in our local news as a Suffolk professor with expertise on predatory mortgage lending.
Link “Kathleen Engel” here to [newly updated] affil board page
The Boston Globe quotes Engel on the national importance of a pair lawsuits filed in federal district court in Massachusetts. Boston attorney Gary Klein is seeking to hold Bank of America and Wells Fargo responsible for “toxic” mortgage loans made to Massachusetts borrowers – loans that the lenders knew the borrowers would be unable to repay. (The loans were originally made by Countrywide Home Loans and World Savings Bank, lenders subsequently acquired by BofA and Wells Fargo.)
URL FOR GLOBE STORY:
http://www.boston.com/business/articles/2009/08/05/attorney_sues_lenders_says_they_created_toxic_products/
The claims are based, in part, on the Massachusetts Unfair and Deceptive Practices Act, the same law that Massachusetts Attorney General Martha Coakley used successfully against failed subprime lender Fremont Investment & Loan. In that case, a unanimous decision by the state’s Supreme Judicial Court last December strongly affirmed a lower-court ruling that thousands of Fremont’s loans were “presumptively unfair” because they had “characteristics that made it almost certain the borrower would not be able to make the necessary loan payments, leading to default and then foreclosure.”
Coakley press release: [link to “used successfully”
http://www.mass.gov/?pageID=cagopressrelease&L=1&L0=Home&sid=Cago&b=pressrelease&f=2008_12_09_sjc_fremont&csid=Cago
SJC decision: http://www.mass.gov/Cago/docs/press/2008_12_09_sjc_fremont.pdf
In making those loans, Fremont considered the borrowers’ ability to make payments only during a three-year initial period, even though they knew that after that time the monthly payments would jump sharply upwards to a level that the borrowers could not possibly repay. The only way that a borrower could escape foreclosure was under the unrealistic assumption that housing prices would continue to increase rapidly; in that case the borrower could refinance into another unfair mortgage with deceptively low initial payments – generating a second round of hefty fees for Fremont.
Professor Engel is right that if these cases are successful – as they should, given the powerful evidence and arguments that are offered – they “will be a model throughout the country.” Many other predatory lenders have cause to be worried.
AFFIL’s Board Chair, Professor Cathy Lesser Mansfield, published this op-ed today in the Des Moines Register. Cathy teaches at Drake University in Des Moines, and her piece is a response to Senator Grassley’s (R, IA) announcement that he will not vote for financial reform. His announcement is surprising because he voted for financial reform when it was in the Senate twice, as a member of the Agriculture Committee and then on the floor. You can read his rather convoluted announcement here, and AFR’s response to it here.
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From 