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

Moving up the Residential Hierarchy: A New Remedy for an Old Injury Arising from Housing Discrimination

In this Article, I demonstrate that claims for lost access to desirable communities can be easily incorporated into an extant category of compensable injuries under the Fair Housing Act. I then introduce a method for assessing the value of this injury. In brief, the method compares the price of housing that a victim of discrimination obtained to the price of the housing he sought and was unlawfully denied to approximate the value of living in the more desirable community. The virtue of the method is that it provides adjudicators with a concrete basis for calculating damages for lost access to a desirable community. In the first part of the Article, I discuss the extent of housing discrimination in the United States, the role discrimination plays in limiting people’s access to the bundle of goods and services that desirable communities provide, the fair housing laws, current remedies under the laws, and the failure of the laws to provide a remedy to people who are denied access to desirable communities as a result of discrimination. In Part II, I describe the method for calculating damages for lost access to a desirable community and discuss some of its complexities. In Part III, I discuss the potential impact of these new damage calculations on the fair housing enforcement scheme

Can Employers Put Genetic Information to Good Use

In my talk today I am going to try to answer the question: Can employers put genetic information to good use? Preparing this talk was a challenge because it required me to switch sides of the table. Having represented plaintiffs in employment discrimination cases for ten years, my inclination is to focus on the ways that employers can use genetic information to the detriment of their workers. I chose to talk about the value of genetic information from the employers\u27 perspective because I wanted to force myself to engage in a disciplined study of the issues, rather than simply don the hat of an employee advocate. Many employee advocates argue that employers should never have any access to their employee\u27s genetic information. What I want to do today is identify situations in which employers could use employees\u27 genetic information to benefit themselves and their employees. In giving these examples, I am not advocating that employers have unlimited access to employees\u27 genetic information. Rather, I am suggesting that with adequate controls there is the potential for employers to utilize employees\u27 genetic information in ways that are socially valuable. For the purpose of this talk, I am focusing on employees whose genetic propensities for certain diseases are not yet expressed, understanding, of course, what Dr. Zahka said earlier, that this can be a hard line to draw. There are two ways to think about using genetic information in the employment context. One is to look at an individual employee\u27s genetic information and the other is to focus on the genetic traits represented by a pool of employees

Can Employers Put Genetic Information to Good Use

In my talk today I am going to try to answer the question: Can employers put genetic information to good use? Preparing this talk was a challenge because it required me to switch sides of the table. Having represented plaintiffs in employment discrimination cases for ten years, my inclination is to focus on the ways that employers can use genetic information to the detriment of their workers. I chose to talk about the value of genetic information from the employers\u27 perspective because I wanted to force myself to engage in a disciplined study of the issues, rather than simply don the hat of an employee advocate. Many employee advocates argue that employers should never have any access to their employee\u27s genetic information. What I want to do today is identify situations in which employers could use employees\u27 genetic information to benefit themselves and their employees. In giving these examples, I am not advocating that employers have unlimited access to employees\u27 genetic information. Rather, I am suggesting that with adequate controls there is the potential for employers to utilize employees\u27 genetic information in ways that are socially valuable. For the purpose of this talk, I am focusing on employees whose genetic propensities for certain diseases are not yet expressed, understanding, of course, what Dr. Zahka said earlier, that this can be a hard line to draw. There are two ways to think about using genetic information in the employment context. One is to look at an individual employee\u27s genetic information and the other is to focus on the genetic traits represented by a pool of employees

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