Mortgage & Loan: High Court Gives Gift To Predatory Lenders

Friend to the consumer?

There's been a lot of righteous fury hurled at the Supreme Court for its decision to uphold the ban on partial birth abortions, but another decision came down the wire yesterday that could have even worse consequences. The Court also ruled that operating subsidiaries of major banks--such as mortgage companies--were beyond the reach of state law:

The regulation that the court upheld pre-empts state regulation of any banking activity that a national bank conducts through an operating subsidiary. The decision therefore presumably applies beyond mortgage lending to other activities that subsidiaries commonly engage in, like the sale of annuities, automobile loans, small-business lending and investment advice.

What this essentially means is that if a mortgage lender uses predatory tactics to nail homebuyers with high-interest loans and bad terms, they're protected from oversight by state law, and governed only by federal law--which, thanks to the influence of big lobbying money--is almost invariably weaker and more gutless.

The timing of this decision could not possibly be worse--now, more than ever, we need strong state laws that address the unique issues each state's mortgage climate must face. This isn't something that can be handled from Washington any more adeptly than it has on Wall Street. More about the decision here.

I never thought I'd see the day when I supported that smirking chimp John Roberts on anything, but his dissent is one I agree with. What a cluster-foulup.

Posted at April 19, 2007 04:48 PM

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Friend to the consumer? There's been a lot of righteous fury hurled at the Supreme Court for its decision to uphold the ban on partial birth abortions, but another decision came down the wire yesterday that could have even worse consequences. The Court also ruled that operating subsidiaries of major banks--such as mortgage companies--were beyond the reach of state law: The regulation that the court upheld pre-empts state regulation of any banking activity that a national bank conducts through an operating subsidiary. The decision therefore presumably applies beyond mortgage lending to other activities that subsidiaries commonly engage in, like the sale of annuities, automobile loans, small-business lending and investment advice. What this essentially means is that if a mortgage lender uses predatory tactics to nail homebuyers with high-interest loans and bad terms, they're protected from oversight by state law, and governed only by federal law--which, thanks to the influence of big lobbying money--is almost invariably weaker and more gutless. The timing of this decision could not possibly be worse--now, more than ever, we need strong state laws that address the unique issues each state's mortgage climate must face. This isn't something that can be handled from Washington any more adeptly than it has on Wall Street. More about the decision here. I never thought I'd see the day when I supported that smirking chimp John Roberts on anything, but his dissent is one I agree with. What a cluster-foulup.