There was a time when predatory lending laws at the state level were dismissed at the federal level by federally regulated banks. No any more! Even troubled Fannie Mae and Freddie Mac are leaving New York in a lurch. They are exiting the subprime market in New York, citing a new state law that could make all those involved in lending deemed to be “predatory” legally liable, including those buying such loans on the secondary market.
This is quite a deveopment for OTS and OCC regulated institutions. Before the wheels fell off of the the subprime lending vehicle the OCC was very vocal about dismissing the states and their regulations. The OCC proudly announced that banks with “NA” in their names did not need to worry about “senseless state laws.” Seen as an open door to abuse, such logic is the primary reason we hear shouts of regulators being asleep while subprime mortgages spread financial difficulties around the owrld. Regulators, including the OCC, were nto asleep at all, but were encouraging home ownership in accordance with federal guidelines.
If the Feds said all those involved in lending deemed to be “predatory”, including those buying such loans on the secondary market, would be held legally liable and accountable, we think the mortgage debacle would have been avoided or much less of a disaster.