Another roundup of article in recent issues of the Times: Friday's Times brought another important installment in "The Debt Trap" series, this one headlined "Home Equity Frenzy Was a Bank Ad Come True," about how banks reframed second mortgages--once seen as a product for those experiencing dire financial problems--as home equity loans. These loans were presented as ways to use the home as a source of funds for "living richly," and thereby vastly increased consumer indebtedness and reduced the amount of equity Americans have in their homes.
Today's Times includes Bob Tedeschi's Mortgages column, "Finding Cash in a Home," about an alternative to reverse mortgages which cuts down on the normally high closing costs for reverse mortgages--but because the lender takes out a life insurance policy on the owner, only owners eligible for life insurance can take advantage of it. In an August 3 column titled "Subprime Loans' Wide Reach," Tedeschi reported on a study by Compliance Technologies that contradicted standard wisdom about subprime loans:
WHILE subprime loans deeply penetrated low-income and minority groups, a new study suggests that more upper-income borrowers and more whites took out such loans than any other groups.
* * * [R]oughly 56 percent [of subprime loans originated in 2006] went to non-Hispanic whites. Affluent borrowers, those with annual income at least 120 percent of their given area’s median income, meanwhile, took out more than 39 percent of the loans.
That seems like a rather low definition of affluent.
Yesterday's Times reported "Judge Rejects Countrywide Settlement" about how a bankruptcy judge rejected the settlement between Countrywide and nearly 300 of its borrowers, saying he wasn't convinced it was fair to the borrowers. The complaint charges Countrywide with making inaccurate claims, and demanding improper fees, among other things. Meanwhile, back on August 7, the Times noted that "Connecticut Joins Other States in Suing Countrywide."
On Wednesday, the Times published a short but ominous-sounding piece, "Some New York Loans Shunned," at the tail of a longer article. Here's an excerpt:
Freddie Mac said Tuesday that it would stop buying subprime loans issued in New York State as a new law takes effect that holds investors accountable for mortgage fraud.
Freddie will not buy loans dated on or after Sept. 1 that meet the state’s subprime definition, the government-chartered company said in a lender bulletin on its Web site. Gov. David A. Paterson of New York signed new foreclosure and lending laws last week that tighten legal protections for borrowers.
The legislation holds mortgage buyers like Freddie liable in ways that “we have no way of monitoring and preventing,” Brad German, a company spokesman, said.
It's not clear how many such loans would be made even if Freddie Mac was willing to buy them: the state law will almost certainly be preempted as to federal lenders, and in the past, lenders have tended to avoid loans labeled as high-interest loans, thus making mini-HOEPA laws effectively usury statutes.
On Monday the Times ran "Web Privacy on the Radar in Congress," about behavioral marketing. An excerpt:
On Aug. 1, four top members of the House Committee on Energy and Commerce sent letters ordering 33 cable and Internet companies, including Google, Microsoft, Comcast and Cox Communications, to provide details about their privacy standards. That followed House and Senate hearings last month about privacy and behavioral targeting, in which advertisers show ads to consumers based on their travels around the Web. * * *
As advertisers become more sophisticated about behavioral targeting, and online privacy standards become increasingly varied, regulators and privacy advocates are becoming concerned. A few companies have taken precautionary measures to try to fend off criticism; in the last few days, for instance, both Yahoo and Google have made it easier for people to opt out of targeted ads on their sites. But that may not be enough.
“Some type of omnibus electronic privacy legislation is needed,” said Representative Edward J. Markey, Democrat of Massachusetts, chairman of the House Subcommittee on Telecommunications and the Internet, “regardless of the particular technologies or companies involved.”
Back on August 6, the Times ran an editorial,"Listen to the 56,000," about the response to the Fed's call for comments on its proposed rules on credit cards. Excerpts:
This anguished deluge should send a clear message to leaders in Washington. The Federal Reserve should swiftly adopt its proposed rules against unfair or deceptive credit card practices. But the real burden to curb these abuses falls on Congress.
For too long, members of Congress have shirked the responsibility to ensure fair lending to credit card customers and have listened more intently to the banking lobbyists. A low point came in 2005, when Congress passed a bankruptcy law that was badly tilted against borrowers. * * *
Ronald Mann, a Columbia Law School professor, has argued that the law creates a “sweat box of credit card debt.”
The editorial also noted that the House Financial Services Committee had voted for a cardholder's bill of rights, but that banks oppose it.
Moving right along, here is an article about deceptive advertising of "free" credit reports that end up costing money. And finally, an article that may scare some, "If You Run a Red Light, Will Everyone Know?" reports on a web site, www.CriminalSearches.com that enables people to conduct free searches to see who has a criminal record.
by Deepak Gupta
