Countrywide (Bank of America) to Pay $335 Million For Racist Lending Practices

Countrywide’s headlong rush to write as many loans as possible was really an effort to extract as many fees as possible from those transactions. That’s how mortgage originators make their money. Countrywide’s brokers also systematically discriminated against minorities (about two-thirds Hispanic and one-third black); in over 200,000 cases, it jacked up interest rates and fees, and added less-favorable terms.

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High Interest Rates Only Work if You Hide Them

In the wake of the CARD Act, credit card interest rates are rising. This should not be a surprise, since the CARD Act forces lenders to put the true cost of a credit card front-and-center. Credit card issuers cannot advertise a low rate and then use fees to jack up the true cost of the card.

By forcing this sort of honesty, the CARD Act has exposed a secret: high interest rates aren’t the result of the market. If consumers know that a card has an interest rate of, say, 79.99%, they won’t pay it.

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A look inside a check cashing and payday lending business

An amusing and terrifying look inside two shady types of businesses that will fleece you every way they can, from check cashing fees to postage for a premium.

As Ben Popken says “I can’t wrap my mind around the idea of paying someone for my own money.”

Other Video | Ben Popken

Reverse mortgages: trouble brewing

In recent years, the Office of the Comptroller of the Currency (OCC)– the main federal regulator of the nation’s biggest banks – has seemed concerned with consumer protection only when it was acting aggressively to protect “its” banks from the prospect of being sued by state attorneys general for their predatory practices.  The OCC pursued this anti-consumer agenda so aggressively that even conservative Justice Antonin Scalia, in a blistering Supreme Court opinion issued earlier this week, felt compelled to denounce their over-reaching.

In a little-noticed speech (pdf) on July 8, however, Comptroller John Dugan – perhaps trying to repair his agency’s tattered reputation – came across as a born-again consumer protector. 

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Mortgage modification: what you can and cannot get

The government and the banks say consumers are getting mortgage modifications, while the numbers and consumer advocate say otherwise. Minnesota business lawyer Nathan Brandenburg took a stab at unraveling the confusion which may be part of the reason why consumers are not getting the modifications they want.

He points out two important features of the loan modification options: (1) they are need-based; and (2) they will not reduce the loan principal.

Need-based means that consumers can obtain a mortgage loan modification only if they can prove they cannot afford their current payments. I am guessing the banks take an expansive view of the term “afford,” which counts out a lot of people.

More importantly, only terms of the loan like interest rates, fixed v. adjustable rate, and length of the loan will be modified. For consumers stuck with homes valued at far less than the loan, this is bad news. If the bank cannot make the loan payments affordable without reducing the principal, they may simply proceed with foreclosure, even though everyone would probably come out ahead if the bank simply reduced the principal on the loan.

But hey, I don’t think anyone believes that banks are rational actors in the economy, anymore.

Mortgage Modification Confusion | Skjold Barthel, P.A.

Why is Obama silent on bankruptcy reform?

The Red Tape Chronicles asks whether Obama is “backing the wrong horse” by championing credit card reform while ignoring bankruptcy reform that would allow bankruptcy judges to reduce mortgage loans in bankruptcy—just like they can do for all other debts. Credit card reform is a great thing, of course, but it will have a tiny effect on Americans compared with bankruptcy reform.

Why is bankruptcy reform so important? Currently, consumers who declare Chapter 13 bankruptcy — the kind where debtors repay their loans but get extra time and some debt relief — find themselves before a federal judge who gathers all the debt-holders into a room and forges a compromise payment plan. Credit card firms, personal loan holders — everybody takes a hit, based on what the debtor can realistically pay.

But currently, primary mortgages are exempt from the process. There’s no way to reduce a mortgage loan in bankruptcy. Mind you, mortgages on second homes can be reduced. So can loans for cars, boats investment properties, etc. Primary mortgages stand alone, outside bankruptcy courts.

Maybe bankruptcy reform champion Dick Durbin has an answer: ““And the banks — hard to believe in a time when we’re facing a banking crisis that many of the banks created — are still the most powerful lobby on Capitol Hill. And they frankly own the place.”

Obama picks credit card reform over housing | The Red Tape Chronicles

Produce the note!

Sometimes the court system actually works. The AP has an interesting article on homeowners who are forcing lenders to <gasp> produce the note—the proof the lender issued a mortgage. Apparently some people are having some success in delaying or stopping foreclosure by simply asking whomever is trying to foreclose to produce the original mortgage note. In these days of selling and reselling mortgages paperwork tends to get lost, so how does one prove they have the right to foreclose on anything?

I don’t know how good a strategy this really is and it likely would take a sympathetic judge, but hey it can’t hurt to ask!

Homeowners’ rallying cry: Produce the note | AP

Subprime lending dropped in ‘07, but people of color still bear the brunt of it (AFFIL Week)

Today marks the release of Changing Patterns XV, the fifteenth annual report on mortgage lending in Massachusetts that I’ve prepared for the Massachusetts Community and Banking Council.

Lots of high-cost subprime lenders bit the dust in 2007, so subprime lending fell dramatically that year.  In Massachusetts, there were 5,085 subprime home-purchase loans made, down from 14,639 in 2006.  As a percentage of all home-purchase loans, subprime loans fell from 19% to 8%.

What didn’t change was the intense targeting of these loans to black and Latino borrowers and neighborhoods.  Among homebuyers in Greater Boston, 22% of all loans to blacks and 20% of all loans to Latinos were subprime, compared to just 5% of all loans to whites.  If you look only at high-income homebuyers, the disparities are even greater: 32% of loans to high-income blacks and 24% of high-income Latinos were subprime, compared to just 4% of loans to high-income whites.  Keep Reading »

Community Reinvestment Act

Ohio Payday Lenders Caught Lying in Ballot Initiative Signature Drive