Consumer Law & Policy Blog

Foreclosure Prevention Guide

by Jon Sheldon

     NCLC just got back from the printer today a new  book, Foreclosure Prevention Counseling: Preserving the American Dream (340 pp. with CD-Rom). The guide provides detailed advice on the mechanics of obtaining a workout, with specific options for Fannie Mae, Freddie Mac, subprime, FHA-insured, VA, and Rural Housing Service loans.  The book also examines ways families can reduce expenses, increase income, and avoid loans that can get them into even more trouble. Other topics include legal defenses to foreclosure, special rights of those in the military, challenges to overcharges and servicer errors, bankruptcy as a way to stop a foreclosure, and steps to take even after the foreclosure.  (View the table of contents here.)

The appendices and companion CD-Rom contain sample forms, checklists, and other key documents, along with state by state summaries of foreclosure and real estate tax abatement laws. Math software helps evaluate workout possibilities.  For more details and ordering information, visit the NCLC website here, or call 617-542-9595.

NPR on Subprime Lending

Yesterday's subprime story by Steve Tripoli, featuring Alan White:

Subprime mortgages are getting all the bad press. But other kinds of subprime borrowing — from credit cards to fast-cash — are just as common, leaving more Americans paying more for loans.

Listen to Steve Tripoli on Marketplace.

And, in a related NPR story from yesterday:

Fed Chairman Ben Bernanke was on Capitol Hill today, where everybody wanted to know whether he thought the subprime market will torpedo the rest of the economy.

Listen to Ben Bernanke on Marketplace.

Consumer Law Publications

We recently obtained permission to reprint on the Blog abstracts of and links to articles published on the Social Science Research Network (SSRN).  As many of our readers will know, numerous writers on legal and other subjects post articles to SSRN when (or even before) they are submitted to law reviews, enabling the articles to be read long before they are available in print.  Consequently, SSRN has become perhaps the most important and certainly the most timely place to find current legal scholarship.  Seven recent abstracts on pieces relevant to consumer law , together with links, are pasted in below:

Tax Refund Anticipation Loans: Losing Popularity Perhaps?

By Brian Wolfman

An article from Saturday's New York Times discusses a a National Consumer Law Center report that explains that, perhaps, the word is getting out that tax refund anticipation loans (RALs) -- short-term loans provided by tax preparers and others in anticipation of the borrower's tax refund -- are not such a great deal.  The loans come at effective annual interest rates of as much as 500%, and, besides, the IRS is processing tax refunds very quickly these days - - in about 7 days when the tax return is filed electronically.  Moreover, for low- and moderate-income taxpayers, electronic filing is free.  As the IRS explains here, that means about 70 percent of all taxpayers -– or 95 million taxpayers -- can file their tax returns electronically at no charge.  So, if taxpayers knew that they could get their refunds so quickly, would they really want to pay loan shark rates to have some immediate cash?

Thanks to the terrific work of NCLC, it appears that the word on RALs is getting out.  As the New York Times article explains, between tax year 2004 and tax year 2005, the number of RALs dropped a whopping 22%.

For further information, see my earlier blogs on RALs here and here.  And go here for discussion of an important case before the U.S. Court of Appeals for the Second Circuit concerning whether states' efforts to regulate RALs are preempted by federal law.

Several Consumer Law Articles in the Times

by Jeff Sovern

The New York Times has had several interesting articles on consumer law issues today and yesterday.  First, yesterday's Times reported on a Senate Banking Committee hearing on subprime lending.  While criticizing regulators for failing to curb risky loans, senators also indicated that they were not inclined to push legislation on the issue.  A second article in yesterday's issue discussed the automated underwriting software subprime lenders use to identity those who are worth lending to: i.e., those who are less likely to default.  Though the article doesn't mention the Equal Credit Opportunity Act, it is likely that ECOA contributed to the development of such software, as well as credit scoring, by requiring that lenders provide specific reasons for denying loans, thereby making it more difficult to justify turning down applicants based on gut feelings, as those using judgmental systems formerly could.  Finally, in a particularly disturbing report, today's Times has an article about lawyers in a product liability case arising out of diet drugs who allegedly appropriated client settlement money and threatened to sue their clients and seek criminal charges against them if they ever revealed how much they received.  The settlement was for $200 million of which clients received $74 million; $20 million went to a charitable fund while the lawyers retained the remaining $106 million.  The lawyers themselves are said to be the target of a grand jury investigation.

Fast Credit Getting Faster

by Chris Peterson

Finish consumers can now obtain high-interst rate loans through text messages on their cell phones. The entire loan application and approval takes only minutes. National Public Radio ran an interesting story on this type of lending earlier today. One can imagine the sort of heartache this will create for people (and families of people) with impulse control problems: gamblers, alcoholics, drug addicts, and compulsive shoppers beware.

New Predatory Lending Legislation a Possibility

Yesterday's New York Times reports that Congressional Democrats are contemplating new predatory lending legislation.  Representative Barney Frank, chair of the House Financial Services Committee, plans to move a bill that "would give borrowers and others the ability to sue the Wall Street firms that package those mortgages and then sell them as mortgage-backed securities, as well as the purchasers of those securities in the secondary market" while Senate Democrats, including Senators Dodd and Schumer, are also looking into the matter.  I wonder if Congress will consider eliminating the authority of federal regulators to preempt state predatory lending statutes as to federally-chartered and regulated financial institutions.

More on the Guidance on Subprime Mortgage Lending

by Jeff Sovern

Over the weekend, Brian Wolfman blogged about the proposed Interagency Guidance on Subprime Mortgage Lending.  The draft Guidance, which is proposed by the Fed, OCC, OTS, FDIC, and the National Credit Union Administration, can be found here.  The Guidance implies that the Agencies have concluded that the Truth in Lending Act (TILA) is not functioning satisfactorily in at least two respects with repect to certain subprime loans (particularly certain adjustable-rate mortgages): the content of TILA's disclosures and its requirement that  disclosures be provided no later than consummation.  Thus, the Guidance states with repect to these loans that "communications with consumers, including advertisements, oral statements, and promotional materials should provide clear and balanced information about the relative benefits and risks of the products. This information should be provided in a timely manner to assist consumers in the product selection process, not just upon submission of an application or at consummation of the loan." 

Maxed Out: "A Horror Movie for Our Times"

By Brian Wolfman

In today's Washington Post, Michele Singletary reviews the new, critically acclaimed movie "Maxed Out" and its companion book "Maxed Out: Hard Times, Easy Credit and the Era of Predatory Lenders."  Deepak Gupta previously discussed the movie in detail on this blog.  The movie opens in Washington, D.C., and in other markets around the country this coming Friday.  A list of openings can be found here.  As the Post puts it, this movie is "A Horror Movie for Our Times."

More Stringent Federal Guidelines on Sub-Prime Mortgage Lending?

Just a follow-up to Chris Peterson's Boston Globe op-ed concerning predatory mortage lending posted earlier today on this blog:  According to today's Washington Post, the Federal Reserve and four other federal agencies (presumably agencies involved in some fashion in mortgage lending) are proposing a new guidance that would impose stricter guidelines on sub-prime mortgage lending.