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 (The loans were originally made by Countrywide Home Loans and World Savings Bank, lenders subsequently acquired by BofA and Wells Fargo.)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.
The CFPA and Wall Street reforms have grabbed most of the headlines, but the financial reform bill also includes some strong and very important rules for new mortgages. There are also some helpful foreclosure prevention provisions, though much more remains to be done for struggling homeowners. Research suggests that up to 13 million homes could be lost in the current foreclosure crisis. 2.5 million already have.
Early in 2009, AFFIL and our Partners pushed Congress to take the common-sense step of 
Today’s Wall Street Journal has a very interesting 
Payday lenders are thriving in the Kansas City, MO area, but consumers and advocacy groups are making sure the federal government knows about the damage caused by these loans.
(Originally posted on 
Everyone agrees that far too few of the homeowners who are facing foreclosure are getting loans modifications that enable them to keep their homes. But there is lots of disagreement about why this is the case.
