Law Commons^™

Banking Law Manual: Federal Regulation Of Financial Holding Companies, Banks And Thrifts (Semi-Annual Supplement)

Patricia A. McCoy

No abstract provided.

Rethinking Disclosure In A World Of Risk-Based Pricing, Patricia Mccoy

Patricia A. McCoy

In response to subprime loan abuses, it is common for policymakers to exhort consumers to comparison-shop for residential mortgages. This policy prescription ignores the fact that price revelation works differently in the prime and subprime markets, impeding search in subprime. In the prime market, lenders reveal firm prices for free, without requiring consumers to first submit loan applications. This dynamic, combined with Truth-in-Lending Act (TILA) disclosures that standardize prices, make it easy to comparison-shop for prime mortgages. In contrast, in the subprime market featuring risk-based pricing, consumers must reveal their creditworthiness before lenders can determine loan prices, which allows lenders …

Turning A Blind Eye: Wall Street Finance Of Predatory Lending, Kathleen Engel, Patricia Mccoy

Patricia A. McCoy

Today, Wall Street finances up to eighty percent of subprime home loans through securitization. The subprime sector, which is designed for borrowers with blemished credit, has been dogged by predatory lending charges, many of which have been substantiated. As subprime securitization has grown, so have charges that securitization turns a blind eye to financing abusive loans. In this paper, we examine why secondary market discipline has failed to halt the securitization of predatory loans.

When investors buy securities backed by predatory loans, they face a classic lemons problem in the form of credit risk, prepayment risk, and litigation risk. Securitization …

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 …

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.

Predatory Lending: What’S Wall Street Got To Do With It?,

Patricia A. McCoy

In this article, we examine the contention that the secondary market will exert sufficient market discipline to drive predatory home loan lenders from the subprime marketplace. Using a so‐called lemons model, we identify the potential risks that investors encounter if they buy securities backed by predatory home loans. We then explain how structured finance, deal provisions, pricing mechanisms, and legal protections shield investors from much of the risk that those loans entail.

While the secondary market does impose some discipline on the subprime home loan market, it is not enough to bring predatory lending to a halt. We provide rationales …

The Demise Of The Common-Law Doctrine In D'Oench, Duhme

Patricia A. McCoy

No abstract provided.