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Paul Kiesel
Paul Kiesel
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How We Got into this Mortgage Mess

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Over the last 15 years, there have been five “avoidable events” stemming from Wall Street’s or Congress’ actions (or inaction), that led directly to the mortgage crisis.

1. Newt Gingrich and the Home Ownership and Equity Protection Act of 1994 (the latter’s goal was written to protect consumers against predatory loans, but it instead helped spark the subprime boom).

2. The “Rodash Fix” revolved around a woman’s lawsuit, Martha Rodash, against atwo lenders because of fee misstatements on her Truth in Lending Disclosure form. After Rodash’s victory in recouping those costs/fee, dozens of class action lawsuits were filed in similar fashion. However, Congress then passed a major amendment to the 1968 Truth in Lending Act, making certain fees, that were grounds for litigation prior, mute.

3. Phil Gramm and the Commodity Futures Modernization Act of 2000.

4. Senator Sarbanes’ unsuccessful effort in instilling “appropriate regulation” to the mortgage industry. Paul Sarbanes and John LaFalce tried to pass the Predatory Lending Consumer Protection Act of 2001 and it failed each and every time is was reintroduced.

5. Wall Street’s Darwinian view: Many people in the finance community view the people who have been victimized by the subprime fallout and the lenders who have suffered most on Wall Street as “welcome additions” to the fallen competitor list.

For more on each of these five events that helped precipitate the subprime boom after 2001, CLICK HERE.