THE CRA IMPLICATIONS OF PREDATORY LENDING

This article considers the Community Reinvestment Act\u27s role in combating predatory lending. It provides an overview of the CRA, explains how CRA-covered lenders may enable predatory lending and explores the relationship between the CRA, federal subsidies and predatory lending. The article concludes that the CRA should be used to penalize lenders that engage in predatory lending and recommends that federal bank regulators use CRA to sanction behavior that could encourage further predatory lending

Spatial and temporal variability of tide-induced salt flux in a partially mixed estuary

Submitted in partial fulfillment of the requirements for the degree of Master of Science at the Massachusetts Institute of Technology and the Woods Hole Oceanographic Institution September 2009Mechanisms for the tidal component of salt flux in the Hudson River estuary are investigated using a 3D numerical model. Variations with river discharge, fortnightly tidal forcing, and along channel variability are explored. Four river discharge conditions were considered: 1200 m3 s-1, 600 m3 s-1, 300 m3 s-1, 150 m3 s-1. Tide-induced residual salt flux was found to be variable along the channel, with locations of counter-gradient flux during both neap and spring tide. The magnitude of tidal salt flux scales with the river flow and has no clear dependence on the spring-neap tidal forcing. The diffusive fraction, ν, has a value of -0.25 to 0.46 in the lower estuary, increasing to -0.23 to 1 near the head of salt. The phase lag between tidal salinity and velocity is analyzed at three cross-sections with: large positive, negative, and weak tidal salt flux. The composite Froude number, G2, is calculated along the channel and indicates nearly ubiquitous supercritical flow for maximum flood and ebb during both neap and spring tides. Subcritical flow occurs during slack water and at geographically locked locations during neap floods. Application of two-layer, frictional hydraulic theory reveals how variations in channel width and depth generate tidal asymmetries in cross-sectional salinity, the key ingredient of tidal salt flux

Turning a Blind Eye: Wall Street Finance of Predatory Lending

Today, Wall Street finances up to eighty percent of subprime home loans through securitization. The subprime sector, which is designed for borrowers with blemished credit, has been dogged by predatory lending charges, many of which have been substantiated. As subprime securitization has grown, so have charges that securitization turns a blind eye to financing abusive loans. In this paper, we examine why secondary market discipline has failed to halt the securitization of predatory loans. When investors buy securities backed by predatory loans, they face a classic lemons problem in the form of credit risk, prepayment risk, and litigation risk. Securitization exacerbates all three risks by unbundling the mortgage process, giving rise to adverse selection. In theory, the lemons problem should cause investors to flee the market for subprime mortgage-backed securities or demand a risk premium commensurate with the worst quality loans. Instead, securitization allays adverse selection concerns by structuring transactions so that risk-averse investors receive their agreed-upon return without needing to screen out predatory loans. In addition to pricing, the secondary market uses structured finance and deal terms, instead of filtering, to manage credit, prepayment, and litigation risk. Furthermore, structured finance provides incentives to securitize predatory loans. Voluntary due diligence could help ameliorate the problem, but those efforts remain sparse. To alter this perverse incentive structure, we propose legislation to impose a duty on secondary market assignees of subprime home loans to investigate and police predatory lenders

Predatory Lending and Community Development at Loggerheads

For decades, cities have invested in decaying neighborhoods, leading to increases in home values and home equity. As a result, these neighborhoods have become ready targets for predatory lenders, who market their abusive loans to financially unsophisticated homeowners with home equity and no relationships with traditional lenders. Some borrowers lose their homes; others forsake home repairs to avoid default and foreclosure. Neighborhoods that once were stable become littered with abandoned and neglected homes, resulting in increased crime, falling home values, rising demands for social services, and lower tax revenues. In the wake of the devastation done by predatory lenders, the question for policymakers is: what can be done? This paper seeks to answer this question. The paper opens by defining predatory lending. Next, the paper describes how the rise of securitization, deregulation of price terms, affordable lending incentives, bank closings, and historical credit discrimination together fueled the rise and institutionalization of predatory lending in the 1990s. Lastly, the paper evaluates different possible approaches to redressing predatory lending, including industry self-regulation, consumer education and counseling, Community Reinvestment Act oversight, criminal enforcement, existing private causes of action, and a suitability proposa

Federal Preemption and Consumer Financial Protection: Past and Future

Starting in 1995 and throughout the subprime boom during the next decade, Congress failed to take action to curb predatory mortgage lending. Many states and cities filled the void by passing anti-predatory lending laws of their own. Lenders, worried about potential liability, quickly organized a full-scale attack on the state and local initiatives. Their most potent strategy lay in challenging the laws and ordinances under federal preemption rules for national banks and federal savings associations that precluded states from enforcing their anti-predatory lending laws. The Dodd-Frank Act curtailed the preemption rules by establishing that state consumer financial laws can only be preempted if they discriminate against state-chartered depository institutions relative to, or prevent or significantly interfere with the powers of, national banks or federal savings associations. Dodd-Frank\u27s preemption standards became effective on July 21, 2011, at which point the U.S. Office of the Comptroller of the Currency (OCC) should have conformed its preemption rulings to the new law. Instead, on that date, the OCC issued a new rule that preempted broad swaths of existing state laws using its old preemption precedents, bypassing the Dodd-Frank procedures along the way. We contend that the OCC\u27s actions are not consistent with Congress\u27s intent and predict that there will be legal challenges to the substance of the OCC\u27s new preemption rule and to the process the OCC employed when adopting the rule

State and Local Anti-Predatory Lending Laws: The Effect of Legal Enforcement Mechanisms

Subprime mortgage lending has grown rapidly in recent years and with it, so have concerns about predatory lending. In response to evidence of predatory lending, most states have enacted new laws or expanded existing laws to address abuses in the subprime home loan market. The effect of these statutes is a matter of debate. This paper seeks to improve the understanding of this increasingly important issue and pays particular attention to the role that legal enforcement mechanisms play in this context. The results of the analysis are consistent with the view that anti-predatory lending laws influence subprime lending markets and that disaggregating the details of the overall legal framework into its component parts is essential for understanding subprime market dynamics. The restrictions, coverage, and enforcement components all have significant relationships with subprime market outcomes, with the coverage relationship found to be broadly consistent with the reverse lemons hypothesis put forward by Ho and Pennington-Cross (2007). The results also suggest that the newer mini-HOEPA laws have had an impact on the subprime market above and beyond the older preexisting laws, particularly for subprime originations. Broader coverage through these new laws is associated with higher origination likelihoods, while increased restrictions through the mini-HOEPA laws are associated with lower origination propensities

The Impact of State Anti-Predatory Lending Laws: Policy Implications and Insights

The subprime mortgage market, which consists of high-cost loans designed for borrowers with weak credit, has grown tremendously over the past ten years. Between 1993 and 2005, the subprime market experienced an average annual growth rate of 26 percent. As this market emerged, so did allegations that subprime loans contained predatory features or were the result of predatory sales practices.3 In the worst cases, brokers deceived borrowers about the meaning of loan terms or falsely promised to assist them in obtaining future refinance loans with better terms. In other situations, borrowers entered into loans with low teaser rates, not aware how high their monthly payments could go when their interest rates reset

Mechanisms of tidal oscillatory salt transport in a partially stratified estuary

Author Posting. © American Meteorological Society, 2015. This article is posted here by permission of American Meteorological Society for personal use, not for redistribution. The definitive version was published in Journal of Physical Oceanography 45 (2015): 2773–2789, doi:10.1175/JPO-D-15-0031.1.Tidal oscillatory salt transport, induced by the correlation between tidal variations in salinity and velocity, is an important term for the subtidal salt balance under the commonly used Eulerian method of salt transport decomposition. In this paper, its mechanisms in a partially stratified estuary are investigated with a numerical model of the Hudson estuary. During neap tides, when the estuary is strongly stratified, the tidal oscillatory salt transport is mainly due to the hydraulic response of the halocline to the longitudinal variation of topography. This mechanism does not involve vertical mixing, so it should not be regarded as oscillatory shear dispersion, but instead it should be regarded as advective transport of salt, which results from the vertical distortion of exchange flow obtained in the Eulerian decomposition by vertical fluctuations of the halocline. During spring tides, the estuary is weakly stratified, and vertical mixing plays a significant role in the tidal variation of salinity. In the spring tide regime, the tidal oscillatory salt transport is mainly due to oscillatory shear dispersion. In addition, the transient lateral circulation near large channel curvature causes the transverse tilt of the halocline. This mechanism has little effect on the cross-sectionally integrated tidal oscillatory salt transport, but it results in an apparent left–right cross-channel asymmetry of tidal oscillatory salt transport. With the isohaline framework, tidal oscillatory salt transport can be regarded as a part of the net estuarine salt transport, and the Lagrangian advective mechanism and dispersive mechanism can be distinguished.Tao Wang was supported by the Open Research Fund of State Key Laboratory of Estuarine and Coastal Research (Grant SKLEC-KF201509) and Chinese Scholarship Council. Geyer was supported by by NSF Grant OCE 0926427. Wensheng Jiang was supported by NSFC-Shandong Joint Fund for Marine Science Research Centers (Grant U1406401).2016-05-0

The Impact of Predatory Lending Laws: Policy Implications and Insights

Over half the states and several localities have enacted statutes and ordinances to regulate abuses in the residential mortgage market. The effect of these statutes is a matter of debate. This paper seeks to improve the understanding of this increasingly important issue and pays particular attention to the role that legal enforcement mechanisms play in this context. We created a legal index of laws governing mortgage lending terms and practices, giving each state an overall score for the strength of its laws. In addition, we disaggregated the index to create sub-indices along three dimensions: (1) the scope of loans covered by the laws; (2) the prohibited loan terms and practices; and (3) the strength of the legal enforcement mechanisms. We use these indices to determine the effect of anti-predatory lending laws-- using both total index scores and the scores using the sub-indices-- on loan applications, originations and rejections. To control for variations within state borders, we employ a geographic sampling approach that focuses on lending activity along state borders, including only loans that were originated in a county that is geographically along a state border and if at least one of the two abutting states has an anti-predatory lending law. We find that the extent of coverage, restrictions, and enforcement embodied in a state\u27s legal framework is associated with significant changes in the probability that a subprime application is rejected and a subprime loan is originated. Coverage is associated with lower subprime rejection probabilities. Restrictions tend to increase the likelihood of rejection and hence retard originations in the subprime market. Finally, the key result in the analysis of enforcement is that stronger enforcement mechanisms reduce subprime rejection probabilities. We conclude the paper by discussing the possible implications of these findings, including how anti-predatory lending laws may have shaped borrower and lender behavior and how our results can help inform shape future lending regulations. This paper makes a timely contribution given the current crisis in subprime lending and the call for increased scrutiny of lenders and the loans they originate