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What Loss Mitigation Taught Us About Housing Finance Reform, Patricia Mccoy Feb 2015

What Loss Mitigation Taught Us About Housing Finance Reform, Patricia Mccoy

Patricia A. McCoy

This blog post describes the implications of the recent US loss mitigation experience for housing reform.

The Cra Implications Of Predatory Lending, Kathleen Engel, Patricia Mccoy Mar 2014

The Cra Implications Of Predatory Lending, Kathleen Engel, Patricia Mccoy

Patricia A. McCoy

Traditionally, policymakers, communities, and industry have regarded the Community Reinvestment Act ("CRA") as a positive mandate for banks and thrifts to do good by increasing investment in low- and moderate-income ("LMI") neighborhoods. When Congress enacted CRA, it was inconceivable that LMI neighborhoods might eventually receive too much credit in the form of abusive mortgages. However, by the late 1990s, predatory mortgages- exploitative high-cost loans to gullible borrowers-were ravaging the inner cities. We address the question: given the surge in predatory lending, how should CRA respond? CRA and federal subsidies to regulated lenders can create perverse incentives for lenders to engage …

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Barriers To Foreclosure Prevention During The Financial Crisis Dec 2012

Barriers To Foreclosure Prevention During The Financial Crisis

Patricia A. McCoy

The number of modifications to distressed residential loans following the 2008 financial crisis has been disappointingly low compared to the number of foreclosures. This raises concerns about the presence of artificial barriers to loan modifications in situations where foreclosure should be avoidable. There are three pressing reasons to care about what the real barriers to foreclosure prevention are. First, foreclosures that could have been avoided inflict enormous, needless losses on borrowers, investors, and society at large. Second, overcoming artificial barriers to foreclosure prevention will result in loan modifications with higher rates of success. Finally, knowing what to fix is necessary …

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Keeping Tabs On Financial Innovation: Product Identifiers In Consumer Financial Regulation Dec 2012

Keeping Tabs On Financial Innovation: Product Identifiers In Consumer Financial Regulation

Patricia A. McCoy

The financial crisis of 2008 gave rise to renewed discussion about whether financial innovations should undergo higher scrutiny for potential harm and, if so, what type? In this Article, the authors propose a new system for monitoring financial innovations through a system of registration, data collection and analysis using unique product identifiers. Creating product identifiers would increase monitoring abilities substantially at relatively low cost by facilitating the linkage of separate databases. The assignment of unique product identifiers would also minimize errors in the identification and classification of different financial products. These identifiers would be available to both the government and …

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The Subprime Virus: Reckless Credit, Regulatory Failure, And Next Steps Dec 2010

The Subprime Virus: Reckless Credit, Regulatory Failure, And Next Steps

Patricia A. McCoy

In this lively new book, Kathleen C. Engel and Patricia A. McCoy tell the full story behind the subprime crisis. The authors, experts in the law and economics of financial regulation and consumer lending, offer a sharply reasoned, but accessible account of the actions that produced the greatest economic collapse since the Great Depression.

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Federal Preemption, Regulatory Failure And The Race To The Bottom In Us Mortgage Lending Standards Dec 2009

Federal Preemption, Regulatory Failure And The Race To The Bottom In Us Mortgage Lending Standards

Patricia A. McCoy

No abstract provided.

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Securitization And Systemic Risk Amid Deregulation And Regulatory Failure Apr 2009

Securitization And Systemic Risk Amid Deregulation And Regulatory Failure

Patricia A. McCoy

During the recent housing boom, private-label securitization without regulation was unsustainable. Without regulation, securitization allowed mortgage industry actors to gain fees and to put off risks. The ability to pass off risk allowed lenders and securitizers to compete for market share by lowering their lending standards, which activated more borrowing. Lenders who did not join in the easing of lending standards were crowded out of the market. Meanwhile, the mortgages underlying securities became more exposed to growing default risk, but investors did not receive higher rates of return. Artificially low risk premia caused the asset price of houses to go …

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The Legal Infrastructure Of Subprime And Nontraditional Mortgage Lending Dec 2007

The Legal Infrastructure Of Subprime And Nontraditional Mortgage Lending

Patricia A. McCoy

This paper provides a critical analysis of the legal landscape of residential mortgage lending and explains how federal law abdicated regulation of the subprime market. First, the paper presents the historical backdrop to government oversight of mortgage lending and identifies the changes to and innovations in the lending process that contributed to the recent transformation of the residential mortgage market. We then describe recent attempts at the state and federal level to re-regulate and the backlash initiated by the federal banking agencies to thwart regulation of their constituent banks through preemption, resulting in parallel universes of regulation. Next, the article …

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The Home Mortgage Disclosure Act: A Synopsis And Recent Legislative History Dec 2006

The Home Mortgage Disclosure Act: A Synopsis And Recent Legislative History

Patricia A. McCoy

This article describes the provisions of the federal Home Mortgage Disclosure Act (HMDA), tracing its legal evolution since 1989, when Congress expanded HMDA to require reporting of home mortgage lending by ethnicity and race. HMDA requires most lenders to report the demographic makeup and geographic distribution of home mortgages to the federal government. The 1989 amendments and later developments transformed HMDA from a law exclusively concerned with geographic disinvestment to one concerned with lending disparities by ethnicity and race. In the process, HMDA evolved from an obscure reporting statute to a flashpoint for debates over lending discrimination and subprime lending.

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A Behavioral Analysis Of Predatory Lending Dec 2004