Home Foreclosure and Predatory Lending
About the Issue
The sub-prime lending issue put in danger the ability of millions of Americans to stay in their homes, disquieted investors and roiled markets worldwide. Working with other state officials, including banking commissioners, and in close discussion with some federal regulators, the banking industry, the investment community and non-profit consumer advocates, state attorneys general were committed to being part of the solution to the complex problems that are arising from the home foreclosure crisis.
In doing so, attorneys general built on a solid record of achievement. Attorney general initiatives in the area of predatory lending yielded the largest recoveries for consumers in the nation’s history: the Household settlement of 2003 returned $484 million to consumers and the Ameriquest settlement of 2006 returned $325 million. These cases were not only multistate in conception and implementation but were also multi-agency – linking not only Consumer Protection Divisions but Civil Rights Divisions from AGs offices as well as State Banking Regulators and County Attorneys. Together, state officials settled the claims and implemented distribution of funds. The National State Attorneys General Program at Columbia Law School hopes that in this section you will find articles and resources that may be helpful in understanding the role state attorneys general played on this important issue.
Study from UNC Center for Community Capital on State Anti-Predatory Lending Law and Preemption
In a new study funded by the National State Attorneys General Program, federal action to exempt national banks from state consumer protection laws was shown to cause more foreclosures and riskier lending practices. The study was led by the University of North Carolina, Chapel Hill's Center for Community Capital.
For the full report click here.
Arkansas Attorney General Visits Program, Records Podcast on Payday Lending (September 27, 2011)
Arkansas Attorney General Dustin McDaniel visited the National State Attorneys General Program on September 23 for meetings with Director James Tierney, program staff, and Columbia Law students. In a discussion with Tierney for the AG Program Podcast, the former police officer from Jonesboro, Arkansas detailed his educational and professional experiences prior to his election as state attorney general. "Your state attorney general's office is absolutely extraordinary in the variety of work that is available," McDaniel said, discussing potential career opportunities for current students. "The notion that good lawyers are only found in high-paying corporate gigs is simply not accurate."
AG Program Podcasts (mp3)
Dustin McDaniel (full)
McDaniel on Payday Lending Operations
Predatory Lending in the News
Big banks abusing 2012 settlement deal: Weak oversight means banks can get away with foreclosing on homeowners in middle of negotiations (September 28, 2015)
The nation’s largest mortgage lenders are violating the terms of a punitive 2012 settlement that was meant to prevent unfair and unnecessary foreclosures that destroyed communities and pushed working families from their homes. State AGs were especially inflamed by stories of banks that continued to accept payments from financially strapped borrowers even as they quietly filed paperwork to take back the homes. But the abuses haven’t stopped. Since the beginning of 2014, more than 60,000 complaints have been filed nationwide by borrowers about servicers rushing the foreclosure process or mishandling a modification request, according to POLITICO’s review of the bureau’s database. But the complaints likely underestimate the problem because most homeowners have no idea the database exists, according to counselors and attorneys.
As Banks Retreat, Private Equity Rushes to Buy Troubled Home Mortgages (September 28, 2015)
Private equity and hedge fund firms have bought more than 100,000 troubled mortgages at a discount from banks and federal housing agencies, emerging as aggressive liquidators for the remains of the mortgage crisis that erupted nearly a decade ago. One company has emerged as a lightning rod, criticized by housing advocates and lawyers for borrowers, but admired by investors: Lone Star Funds, a $60 billion private equity firm founded in 1995 by John Grayken. In just a few years, Lone Star’s mortgage servicing firm, Caliber Home Loans, has grown from a bit player to a major force in the market for distressed mortgages.
California AG Subpoenas Mortgage Giants Fannie and Freddie Mac (November 16, 2011)
California Attorney General Kamala Harris’ office has issued subpoenas to mortgage lenders Freddie and Fannie Mac as part of an ongoing investigation into mortgage lending practices in the state. According to an anonymous source, Harris’ subpoena asked the lenders questions regarding their business in California, including acting as landlords for foreclosed properties in the state. Additionally the subpoena allegedly requested information on their mortgage-servicing and foreclosure practices.
Delaware AG Sponsors Foreclosure Prevention Workshops (November 8, 2011)
The Delaware Attorney General’s Office announced that their Mortgage Fraud Task Force is sponsoring free workshops in November on foreclosure prevention. According to the office, the workshops are aimed at providing information that will help residents keep their homes, assist with loan modifications, and generally reduce foreclosures. In a statement Delaware Attorney General Beau Biden said “Our goal is to make sure that homeowners who are seeking ways to meet their mortgage obligations are able to have meaningful conversations with their lenders and avoid being victimized by mortgage rescue scams that strip homeowners of their equity and their home.” The workshops will include mortgage service providers, state employees, and housing counselors.
Settlement With Financial Institutions Over Mortgage Foreclosure Practices May Be Near (October 31, 2011)
After months of wrangling between state attorneys general and large financial institutions over home foreclosure practices, a settlement deal may be close at hand. The essential terms of the deal are reported to require the financial institutions to pay between $3.5 and $5 billion in cash and provide an additional $20 billion in credits to banks that agree to reduce a predetermined dollar amount of principal owed on mortgages that they own or service for private investors. The financial institutions in question are accused of filing phony documents in courts and foreclosing without showing they had the legal right to do so. Officials from Delaware, New York, Massachusetts and Nevada have expressed concern that any deal would provide insufficient assistance to borrowers, would preclude further investigation and would generally fail to hold banks accountable for their actions.
Massachusetts AG Prepares to Sue Mortgage Lenders (October 18, 2011)
Massachusetts Attorney General Martha Coakley is preparing to sue some mortgage lending companies for improper foreclosure procedures. Coakley is investigating allegations of foreclosure improprieties by the lenders, such as threatening homeowners with fees and property seizures despite having granted permanent loan modifications to the owners. In a statement Coakley said, “To the extent that banks are not meeting their obligations, this conduct is inexcusable and my office will work to hold them accountable.” Coakley did not reveal what banks her investigation or potential lawsuit target.
Tierney Featured in Bloomberg Article on Ongoing State Mortgage Fraud Investigations (October 13, 2011) A year after all 50 states announced investigations into potential violations of state laws by lenders using alleged fraudulent tactics in the process of foreclosing homes, Program Director James E. Tierney discussed the states' lack of progress in settling the case. "Attorneys general have worked long and hard together to pull together an agreement and may not make it," said Tierney. "But their disagreements have been honest ones, and they have certainly come closer than any other groups of elected officials in actually doing something to enforce laws and help consumers."
Read More Predatory Lending In the News Articles Here
Times Topics: Foreclosures (last updated June 27, 2011)
This section of The New York Times website offers a wide variety of news, analyses and opinion articles and multimedia on mortgage foreclosures, including the role of state regulators.
Making Home Affordable: An official program of the Departments of the Treasury & Housing and Urban Development
Website of the federal program to help homeowners avoid foreclosure.
Modifying Mortgages Can Be Tricky (February 20, 2009)
Article in The New York Times discussing the risks and benefits of modifying mortgage agreements to reduce monthly payment burdens. Features Iowa AG Tom Miller.
Progress In Preventing Mortgage Foreclosures (November 2, 2007)
Testimony of Tom Miller, AG of Iowa, before the Committee on Financial Services, U.S. House of Representatives
MEMO: Overview of The Subprime Foreclosure Crisis (September 10, 2007)
By Patrick Madigan - Iowa Assistant Attorney General
In this policy paper, AAG Patrick Madigan of Iowa answers why we are currently facing a subprime foreclosure crisis and outlines how AG’s can respond to this national crisis. Madigan’s analysis and conclusions represent the thinking of those who have joined the 10-state task force led by Iowa AG Tom Miller.
Task Force Will Seek More Loan Revisions (September 8, 2007)
A recent Wall Street Journal article outlines the work that AG's are doing to help families stay in their homes amidst the rising tide of home foreclosures. Led by Iowa AG Thomas Miller, attorneys general and banking regulators from 10 states have formed a task force aimed at pursuading mortgage-servicing companies and investors to restructure troubled subprime loans. The task force, has invited a dozen of the nation's largest subprime-mortgage-servicing companies to meet later this month in Chicago.
Comments of Iowa Attorney General Thomas Miller to the Board of Governors of the Federal Reserve System (August 14, 2007)
In Comments to the Fed board on August 14th, Miller said improved disclosures are not the answer to abusive mortgage practices, and that all subprime loans should be required to be underwritten according to an ``ability to repay’’ standard. He said prepayment penalties should be banned for subprime loans, the Fed board should require escrow accounts for taxes and insurance, and stated income or low doc loans should be restricted for the vast majority of subprime loans.
Click here to read the full comments
New Iowa “Foreclosure Hotline” (September 11, 2007)
AG Miller urges Iowans facing a mortgage foreclosure to call 877-622-4866 (toll-free) to reach the Iowa Mediation Service, which will take information from borrowers and then explore if a loan modification might work for both the borrower and lender.
Miller works on foreclosure mediation plan (August 22, 2007)
Des Moines Register, by S.P. Dinnen
AG Miller is crafting a plan to bring home buyers and lenders together to discuss ways they can make loan repayments more affordable. If successful, Iowa's program could be used by other states as a model to fight foreclosures.
Illinois Homeownership Preservation Summit, July 2007
Illinois AG Lisa Madigan recently hosted a summit to address the issue of rising home foreclosure. The Summit is the second component of a two-part initiative that Madigan launched to address the foreclosure crisis. As the first component, Madigan crafted a bill this legislative session to address the problem at the point of loan origination. Here are links to important resources related to the meeting.
Predatory Lending fact sheet for consumers
Credit and Lending Issues Publications (scroll down for additional resources)
Consumer & Antitrust Leadership Sessions, March 2007
Predatory Lending was one of the primary topics covered during our March 2007 meeting. Many of the resources on this site are drawn from this conference.
Testimony by Martin Eakes February 7, 2007
CEO , Center for Responsible Lending and Center for Community Self-Help
Before the U.S. Senate Committee on Banking, Housing and Urban Affairs : “Preserving the American Dream: Predatory Lending Practices and Home Foreclosures”
Center for Responsible Lending
Consumer Federation of America
Resources from AG Offices
Coakley Addresses Home Foreclosure Crisis (May, 2009)
This Massachusetts AG page provides information about recently enacted Attorney General regulations, state law, and federal law relevant to predatory lending and housing.
Iowa Attorney General Suggests Legislators Reexamine Predatory Mortgage Lending (February 13, 2007)
Iowa Attorney General Tom Miller suggested several legislative proposals directed at predatory mortgage lending last February. The Iowa Division of Banking and Superintendent Tom Gronstal joined AG Miller in backing the proposed legislation. AG Miller led the nationwide, multi-state settlements with Household Finance and Ameriquest Mortgage Company which resulted in over $800 million in payments for consumers.
Swanson Appointed Study Group Releases Report on Predatory Lending (January 2007)
In December 2006, Minnesota AG Lori Swanson appointed a Study Group to propose legislation to address the state’s predatory lending crisis. The Study Group was comprised of state legislators, bankers involved in mortgage lending, and non-profit organizations that assist victimized Minnesota homeowners. The report’s first half describes Minnesota’s burgeoning home foreclosure crisis and the state’s existing law regulating home mortgage lending. The second half details the legislation proposed by the Study Group to address these problems.