8 - Incomplete Justice: Legal Actions against Predatory Lenders

Summary

Chapter 8 examines legal actions brought against predatory subprime lenders and servicers. It briefly summarizes the results of allegations of fraud and violation of various federal and state securities and financial services law. This chapter also provides contextual analysis relating to claims brought against lenders under anti-discrimination law. The chapter commences with a brief overview of the types of settlements negotiated, and then turns to the specific financial firms that issued or serviced predatory mortgages and residential mortgage-backed securities. It unpacks, to the extent that public disclosures have allowed us to research, how the money, intended in part for consumers, is actually used. The chapter analyzes how the money from the settlements could have been more equitably distributed, and could have offered different signals to the mortgage industry going forward in such a way as to prevent the most recent forms of predatory lending. For the most part, investors in these banks, brokerage and servicing firms appear to have recouped a sizable amount of their losses. Consumer borrowers are not as fortunate.