Lenders Get You For More Green If You’re Black or Brown
From Cleveland Free Times comes this article on race, class, predatory lending, and the efforts of a few key consumer advocate attorneys to hit lenders who contribute to the problem right where it hurts. By Charu Gupta, Published July 11, 2007:
The line outside Ed Kramer's office seemed never-ending. Every day, more people filed into the Cleveland fair housing lawyer's office with tales of foreclosure. And there was an unmistakable pattern: Nearly all were poor people of color, and all had been locked into unaffordable loans, with high interest rates and exorbitant broker fees.
For every foreclosure plight Kramer and his firm, Housing Advocates Inc., took on, he learned that 20 others, with claims just as good, had lost their homes because of a predatory loan. There was no way to represent everyone in need. Kramer's law practice had only a handful of attorneys; resources were stretched thin.
The problem wasn't going away. Something needed to change.
"We cannot solve this problem of predatory lending on a piecemeal basis," a fed-up Kramer told colleagues earlier this year.
So, after 32 years of applying state and federal fair housing statutes to defend clients against unfair housing providers, Kramer decided it was time to use the same laws differently. In April, Kramer turned plaintiff and filed a class-action complaint that goes past individual brokers and at the banks and mortgage companies that, he says, paid the brokers to target African Americans.
The suit represents a tectonic shift in how predatory lending cases are handled. Case-by-case approaches have left attorneys and investigators unable to detect larger patterns of racially motivated lending. But now, Kramer's new approach, and pricing data available only since 2004, has emboldened a host of players - all separately coming to the conclusion that it's time to switch targets: to the banks and investment firms.
Since loan-pricing data first became publicly available, at least 200 lenders have come under the scrutiny of federal regulators for high correlations between their subprime products and minority clients. Agencies like the U.S. Department of Housing and Urban Development have continued to mine the new databases, adding more lenders to a growing list of investigations.
Ohio's attorney general is looking at ways to take the fight directly to Wall Street, with both civil complaints and criminal indictments alleging that investment banks either knew about the fraud, or should have.
Combined, the efforts are aggressive and the first of their kind to go systematically beyond the individual mortgage broker and after the banks that underwrote the problem loans. It's also uncharted territory, and the learning curve is steep. The significant time and resources being allocated to predatory lending investigations suggests that not only is there meat in the discrimination theory, but that, at last, government regulators might be able to take a big bite. Keep Reading