States Are Pondering Fraud Suits Against Banks

New York Times ^ | November 2, 2009 | David Streitfeld, John Collins Rudolf

[Lorianne]

PHOENIX — Newly empowered by the Supreme Court, the attorneys general of several states hit hard by the housing collapse are exploring consumer fraud suits against major mortgage lenders.

Frustrated by the banks’ inability or unwillingness to stop an avalanche of foreclosures, the states are considering lawsuits over the creation and marketing of millions of bad loans as well as the dismal pace of mortgage modifications.

Such cases would have been impossible until recently, because federal regulators had exclusive oversight of national banks. But a 5-to-4 Supreme Court decision in June allowed the states to exercise their own supervision, giving them significant leverage.

“We tried to use the tool to be persuasive with the banks,” Arizona’s attorney general, Terry Goddard, said in an interview. “But their waterfall of excuses, the abysmal numbers of modifications, tells us persuasion is not working.”

As a result, he said, “we’re moving much closer to litigation.”

While statutes vary, those of every state prohibit fraud in consumer lending. The attorneys general are considering the theory that the banks essentially perpetrated a vast fraud on consumers by marketing exotic loans that would prove impossible to pay back.

[ABQHispConservative]

These AG’s should go after Congress first for imposing ridiculous lending rules on banks.

[OrangeHoof]

Throw in a perp walk of Dodd and Franks right out of the Capitol Building and I’d be down for it. Otherwise, why demonize the lenders for doing what Congress made them do with implied threats of lawsuits if they didn’t?

[bruinbirdman]

"These AG’s should go after Congress first for imposing ridiculous lending rules on banks."

They can start with ACORN who falsly filled out mortgage forms for illiterate aliens.

yitbos

[headstamp 2]

Yes, the banks should simply give the houses away.

[AD from SpringBay]

And people should be allowed to sign contracts with no due diligence, understanding, or obligation on their own part. To expect responsibility is simply criminal.

[ABQHispConservative]

But they won’t. I guess banks are the new boogy man for the libs. I wonder if this an attempt to nationalize all lending. Wasn’t there a story regarding ACORN and some sort of financial oversight?

[org.whodat]

While statutes vary, those of every state prohibit fraud in consumer lending. The attorneys general are considering the theory that the banks essentially perpetrated a vast fraud on consumers by marketing exotic loans that would prove impossible to pay back.

That is true, but they need to go after the builders and realtor's as well.

[grey_whiskers]

While statutes vary, those of every state prohibit fraud in consumer lending. The attorneys general are considering the theory that the banks essentially perpetrated a vast fraud on consumers by marketing exotic loans that would prove impossible to pay back.

And what of the stimulus and TARP and entitlements...?

Cheers!

[org.whodat]

If you think MORTGAGE ORIGINATORS were making as many loans as fast as they could to any and all comers, because they were forced to. Then you are ready for the straight jacket. They made between, $6500.00 to $9000.00 on each of those loans when bundled and sold.

Here you a fair read, try educating yourself.

http://gaddiskinherd.com/blog/

[org.whodat]

http://gaddiskinherd.com/blog/

[ABQHispConservative]

Of course they made money. They were lousy loans. By bundling them and securitizing them they shifted the risk to someone down the financial line. Were I in their place, I would do the same thing. They were gaming the system. It happens all the time. Unless you wanted them to eat the crap loans?

But if they were ‘encouraged’ to lend to individuals that had no means of repaying, then that means that they were forced.

[org.whodat]

Yes, George Bush encourage Fannie and Freddie to make 5.5 million of them, in a deal worked out by Mel Martinez. But I think it was more of leading lambs to the slaughter than it was force.

[bruinbirdman]

"That is true, but they need to go after the builders and realtor's as well."

The appraisers.

yitbos

[rabscuttle385]

*Ping!*

[org.whodat]

The Appraisers:

True, way to many appraiser have no, none, zero, formal education in appraising. The job should require at least a BS degree with a lot of back ground in economics.