The Supreme Court has sided with the State of New York Attorney General’s appeal that it should be allowed to proceed in its investigations of numerous national mortgage lenders for potential discrimination in lending practices.
A lower court had blocked this based on the grounds that the New York Attorney General essentially had no jurisdiction in the case given federal fair housing laws. For more background on this, see Cuomo vs. Clearing House Association, L.L.C. Clearing House Association is a consortium of national lenders that included some of the lenders that received ‘letters of inquiry’ from the previous New York Attorney General in the matter.
As a Realtor who understands much of how we got into the mess our local market and the nation is in, I favor the investigation. There simply was a lot of action based on greed and though I don’t have any idea as to whether minorities were charged higher interest rates and other fees for their loans, it is clear that an environment that promoted such a hyper-growth in profits can lead to other improprieties.
One can argue that if there was not any wrong-doing, that the lenders will be cleared in this respect and there should be no objection to the investigation moving forward. However, I am not naive to ignore that these companies will incur substantial legal bills and potential bad public relations even if nothing wrong was perpetrated. Nonetheless, this is an important issue to pursue to determine whether improprieties exist or not.
Here’s a final opinion on the case from Banking Law Prof Blog that I found insightful:
“The Cuomo opinion must be read in light of the subprime lending crisis which has bloomed into a recession after the commencement of this case. This case was brought for the express purpose of blocking State investigation into abusive lending. Unchecked abuse is exactly what happens when a powerful federal agency crusades to enlarge its own jurisdiction and protect rather than regulate the industry it oversees. Common sense has indicated for at least the last five years that the OCC [Office of the Comptroller of the Currency] has neither the staff nor the inclination to enforce consumer protection laws. How could it not have been apparent to Congress and the courts that acquiescing in this agency’s aggressive efforts to prevent any other entity doing so would have disastrous results for consumers and for the economy?”
The Office of the Comptroller of the Currency “Administrator of National Banks” was the federal agency that tried to block the New York Attorney General’s investigation here in addition to the Clearing House Association, L.L.C. stepping in to lend support behind the OCC. The author here is calling out the obvious in that the OCC is asserting jurisdiction over enforcement of consumer protection laws in the case of national mortgage lenders while at the same time, clearly not showing any significant past enforcement of the very issues that created the mortgage financial crisis in the first place. It is that past purported lack of enforcement, the author suggests, that lends credence to a concern for how national banks treat consumers in the future.
The decision was penned by Justice Antonin Scalia in a 5-4 vote.
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