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Thursday, February 14, 2008

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Online Business Loan Review

While it's probably not fair, it's a little difficult to give credibility to anything Eliot Spitzer says after his little prostitution ring scandal put a slight "bump" in his political career.

Bryan

One of the things that is missing from this dialogue is the responsibility of state regulators to regulate the state-chartered brokers and lenders where the vast majority of subprime originations occurred in the key years pointed out.

Comptroller of the Currency John C. Dugan responded by saying, "The OCC extensively regulates the activities of national banks, including mortgage lending. The OCC established strong protections against predatory lending practices years ago, and has applied those standards through examinations of every national bank. As a result, predatory mortgage lenders have avoided national banks like the plague. The abuses consumers have complained about most — such as loan flipping and equity stripping — are not tolerated in the national banking system. And the looser lending practices of the subprime market simply have not gravitated to national banks: They originated just 10% of subprime loans in 2006, when underwriting standards were weakest, and delinquency rates on those loans are well below the national average.

Nothing the OCC has done has prevented the states from regulating and preventing abuses among the lenders that they license – lenders that are the source of most of today’s problems. The states have ample authority – as well as clear responsibility – to set standards for these lenders and enforce them. It defies logic to argue that preemption was an impediment. National banks are bound to obey the strict standards enforced by the OCC everywhere they operate – even in states that had far less rigorous standards. The states should have applied equally rigorous standards to the non-bank lenders that were responsible for the bulk of the problems."

Even more interesting is that today New York entered into the same type of preemption agreement with Pennsylvania and New Jersey that it criticizes at the federal level (See Albany Times Union -- http://timesunion.com/AspStories/story.asp?storyID=664815&category=BUSINESS&newsdate=2/19/2008).

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