Attorney generals of 2 small states (NC and Iowa) warned the federal comptroller months earlier that lenders were pushing increasingly risky mortgages. The newer mortgage loans were termed “predatory lending.” They urges the nation’s top bank regulator to allow states to limit exhorbitant interest rates and fineprint loan fees.
These mortgage loans were termed “oppressive” with the banking industry taking advantage of people struggling to get a loan. States were prohibited from reining in reckless mortgage lenders.
Some states passed laws aimed at limiting quick mortgage loans to slow the subprime lenders frenzy. Interest rate cuts and inadequate supervision of mortgage companies fueled these loans even further, creating a mortgage loan meltdown.
Frank Jackson, mayor of Cleveland, compared subprime mortgage loans to organized crime. No doubt that many lenders will be debating about who is to blame for the mortgage loan meltdown for a very long time.