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Alan White
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Interesting comments. Adam's argument does require looking to function rather than form. It is certainly true that the payday loan contract is not literally an assignment of wages in the hands of the employer, and the check or AH authorization is an order to pay, not an assignment of the bank's obligation to the borrower. Also, even if the contract engages the borrower not to stop payment on a check or prevent the electronic debit, the borrower could "revoke" the functional wage assignment by stopping the direct deposit of wages from the employer to the bank without violating the loan contract. Nevertheless, from the least sophisticated consumer standpoint, the borrower could easily have the impression that her directly deposited wages are automatically used to pay the loan if she does not pay the loan in cash. That is exactly the in terrorem effect of wage assignments that the FTC rule was enacted to prevent.
Adam, I think you're right. The postdated check or ACH authorization serves the same function as the classic wage assignment prohibited by the FTC rule, i.e. to insure payment from the borrower's wages in the event of default. I've also wondered about the prohibition on mandatory electronic transfers in Sec. 913 of the EFTA, with regard to ACH-based payday loans. As far as revocability, the typical payday loan contract provides that stopping payment on a check is a breach or a default. . I imagine loans secured by EFT payment have similar provisions.
Jason, the Irish central bank has set targets for all banks to achieve sustainable solutions for all mortgages in arrears, as part of a program called the Mortgage Arrears Reduction Strategy. The "split mortgage" is one of many strategies recommended in the 2011 Keane report My understanding is that these are portfolio loans, i.e. not securitized. US banks are actually writing down a fair amount of principal on portfolio mortgages in default. The obstacle to broader writedowns and other creative solutions remains the policy of Fannie, Freddie and FHFA.
We still have a ways to go, five years after the Global Financial Crisis. Total mortgage debt has eased down from 10.5 trillion dollars to 9.3 trillion, but that 10% drop aligns poorly with the 25% drop in home values,... Continue reading
Posted Nov 26, 2013 at Credit Slips
Banks and insurance companies are apparently gnashing their teeth at the news that the Mt. Holly case pending before the Supreme Court has been settled. The case itself does not involve financial services; it arose from a Fair Housing Act... Continue reading
Posted Nov 14, 2013 at Credit Slips
Federal bankruptcy law defers to the states on a critical issue: what is the basic minimum income and property that debtors need not surrender to creditors. Four states protect 100% of workers' wages, while 21 states allow creditors to garnish... Continue reading
Posted Oct 15, 2013 at Credit Slips
Year Six of the great foreclosure crisis came to a close on June 30 with no real end in sight. Five million homes have been foreclosed and another million or more were surrendered by distressed home owners in short sales... Continue reading
Posted Oct 1, 2013 at Credit Slips
I recently stumbled on this excellent compendium of more than 300 books on the financial crisis. It also includes a list of 25 or so books that predicted the crisis, as well as a useful link to an annotated list... Continue reading
Posted Sep 10, 2013 at Credit Slips
Congress and the President are making huge decisions about the future of our biggest consumer credit markets – mortgages for homebuyers and college loans for students. Unfortunately critical policy choices are being avoided, ignored, or obfuscated. I’ll comment on student... Continue reading
Posted Aug 1, 2013 at Credit Slips
The Supreme Court granted certiorari today in MOUNT HOLLY, NJ, ET AL. V. MT. HOLLY GARDENS CITIZENS, on the question whether Fair Housing Act claims of race discrimination in the sale, rental or financing of housing can be proven based... Continue reading
Posted Jun 17, 2013 at Credit Slips
with Mel Watt, according to an AP story today. Congressman Watt of North Carolina was a moving force behind Miller-Watt-Frank, the mortgage reform legislation that eventually found its way into Dodd-Frank financial reform. Given that our all-but-nationalized housing finance system... Continue reading
Posted May 1, 2013 at Credit Slips
A remarkable tabulation of the more than 3 million homeowners found to have been victims of mortgage servicing errors or fraud was released last week by the Fed and other bank regulators. About 25,000 foreclosures were started while homeowners were... Continue reading
Posted Apr 14, 2013 at Credit Slips
Today the Supreme Court ruled in Comcast Corp. v. Behrens that an antitrust class action was improperly certified because Justice Scalia and four other Justices found the plaintiffs' damage theory inadequately supported by expert testimony. Others will no doubt have... Continue reading
Posted Mar 27, 2013 at CL&P Blog
That is the finding of a report released yesterday by the Inspector General of FHFA, the agency that oversees our nationalized mortgage funders Fannie Mae and Freddie Mac. Mortgage servicers are paid incentives by Freddie for quick foreclosures, but not... Continue reading
Posted Mar 22, 2013 at Credit Slips
The New York Fed has posted a new analysis of student loan debt. Depending on how you read the data, student loan borrowers are either in serious trouble, or are no worse off than consumers with credit card debt or... Continue reading
Posted Mar 1, 2013 at Credit Slips
There are some assumptions underlying the proposed interpretation of data here. If 10% of loans result in a repo, it does not follow that 90% of borrowers don't lose their car, if borrowers have multiple loans. As for the alternative transport to work issue, getting a ride with friends and buying a new car may be ambiguous responses, especially allowing for the optimism bias. Those categories may represent borrowers with at least some difficulties posed by losing their car. In other words, one could say 66% of borrowers report not working or having reliable alternative transportation. Finally I would want to inquire a bit about the Oregon and Virginia data to see if some legal environment or reporting issue skews them from the other states.
Race -it continues to determine the availability and the price of credit, and particularly home financing, as each annual release of the Home Mortgage Disclosure Act data reminds us. No matter how much empiricists control for credit scores, home values,... Continue reading
Posted Feb 12, 2013 at Credit Slips
Adam Levitin predicted here that the "independent" review of banks' foreclosure files ordered by the OCC in the wake of the robosigning scandals would be a sham, based among other things on the adverts to hire the reviewers. Now, one... Continue reading
Posted Jan 5, 2013 at Credit Slips
The crisis tally so far: about 4.7 million completed foreclosure sales from July 1 2007 through 2012 (extrapolating the 4th quarter), and more than 12 million foreclosure starts. Adding short sales brings the total home losses to well above 5... Continue reading
Posted Dec 22, 2012 at CL&P Blog
Image is the on-line microlending network that allows anyone to lend $25 or more to individual low-income borrowers around the world for micro-enterprise and housing. Kiva is an entirely different way of thinking about credit and financial intermediation. While it... Continue reading
Posted Dec 8, 2012 at Credit Slips
While industry and government news releases emphasize the declining rates of delinquency and foreclosure, the declines remain agonizingly slow. Yes, serious defaults on mortgages are down from their peak in 2010. On the other hand, there have been 4.5 million... Continue reading
Posted Sep 28, 2012 at Credit Slips
Thanks for the comments. I did mean loss mitigation in the literal sense. Foreclosure delays are in many instances allowing less costly foreclosure alternatives to go forward. The federal banking agencies found last year that mortgage servicers systematically engaged in unsound practices including foreclosing on loans with approved modifications in place and failing to communicate with borrowers effectively about loss mitigation. Treasury suspended HAMP payments to Chase and BoA last year because they were seriously underperforming their peers in making NPV positive modifications. etc. There is ample evidence of "irrational", i.e. wasteful, conduct by mortgage servicers, largely due to agency problems. As for the comment about costs being passed on to consumers, that begs the question whether foreclosure delays impose net costs or benefits due to increased loss mitigation.
Toggle Commented Sep 27, 2012 on FHFA punishes states at Credit Slips
My comments on the FHFA mortgage fee increase for NY, NJ, FL, IL and CT, here at Consumer Law & Policy. Continue reading
Posted Sep 26, 2012 at Credit Slips
FHFA, the bizarre federal agency running our nationalized mortgage funders Fannie and Freddie, announced a proposal last week that would surcharge mortgages in five states – New York, New Jersey, Florida, Illinois and Connecticut, with a 30 basis point (0.3%)... Continue reading
Posted Sep 26, 2012 at CL&P Blog
The annual Federal Reserve report on Home Mortgage Disclosure Act (HMDA) data for 2011 paints a bleak picture. Despite interest rates at or below 4%, mortgage lending volume continued its four-year decline. The drop in mortgage lending was particularly steep... Continue reading
Posted Sep 19, 2012 at Credit Slips