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Paul Kiesel
Paul Kiesel
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Mortgage Lending Fraud – Class Actions the best answer

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Mortgage Lending Class Action crisis in California only gets worse.

When we brought the first class actions in California involving the Sub-Prime mortgage mess in June of 2007 I blogged here and said, prophetically, “this is the tip of the ice berg.” True to that prediction matters have only gotten far far worse since then, and, I’m afraid, are only going to continue to trouble our economy and, most significantly, borrowers in this country. Since Countrywide first introduced the Option ARM Loan product other lenders jumped onto the lending “band wagon” and made loans whose foundations were as shaky as the San Andreas Fault. Washington and the Federal Reserve Board have only recently begun to act but this is clearly to little to late. Every day news breaks addressing another failure, write down, or restructuring, this trend will only continue. Unfortunately, only through the class action remedy will tens of thousands of homeowners find protection from the avarice and greed of the lending community.

The Federal Reserve Board’s attempt to strengthen mortgage lending rules does little to address the broad harm that has been done to borrowers in California and throughout the country. For example most sub-prime loans do not allow borrowers to pay off their loans, known as a pre-payment, for three years. However, these pre-payment penalties are so severe that the majority of borrowers can’t refinance out of their Option ARM loan product. The Fed’s new rules prevents banks from having pre-payment penalties ONLY after the first five years. This, quite frankly, is a worthless regulation. I’ll keep you posted as we go along.