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Tuesday, February 19, 2008

Comments

Adam Levitin

The OCC's website does not list a single enforcement action since 2004 against Wells Fargo, Chase, HSBC or Citi relating to mortgage lending. This, despite 12 CFR 7.4008(b), which provides that "A national bank shall not make a consumer loan subject to this §7.4008 based predominantly on the bank's realization of the foreclosure or liquidation value of the borrower's collateral, without regard to the borrower's ability to repay the loan according to its terms. A bank may use any reasonable method to determine a borrower's ability to repay, including, for example, the borrower's current and expected income, current and expected cash flows, net worth, other relevant financial resources, current financial obligations, employment status, credit history, or other relevant factors." Perhaps the second sentence of the reg provides the out, but the first sentence sure looks bad in the subprime lending context (especially in hindsight).

Alan White

I also wonder where the Comptroller gets his data. Subprime origination stats are available at www.nationalmortgagenews.com for 2006 and 2007. In most quarters the top ten subprime originators included Wells Fargo, Chase, HSBC and Citifinancial. Washington Mutual is protected by OTS preemption, so five of the top ten subprime lenders were out of the reach of state regulators. As far as the intolerance of OCC for predatory lending practices, a quick Google search for "Wells Fargo predatory lending" or "Citifinancial predatory lending" will turn up some considerable evidence to the contrary.

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