Predatory Lending Fix Threatens Mortgage Market
Comments
03/01/2008 - posted by Don Arpin
Jim Haughey will be relieved to know that judge specifically forbids the outcome that Mr. Haughey warns against. The judge’s written decision says on page 28, “this Court emphasizes that borrowers who have received presumptively unfair loans from Fremont should not interpret this preliminary injunction to mean that they have been released from their obligation to repay these loans. They have not been given any such release. The spirit of this decision is simply that Fremont, having helped borrowers get into this mess, now must take reasonable steps to help them get out of it.”
That decision is a far cry from “awarding discounted houses to predatory borrowers who signed a mortgage contract that they knew they could not meet.”
As the courts struggle to sort out who pays for the subprime mortgage mess there is a risk that overzealous punishment of of clearly predatory lenders may reward predatory borrowers causing leners for conforming mortgages to boost the risk premium they charge for fear the courts may excuse their customers from repayment.