News Story (NATIONAL)
August 25, 2014
Link to story
Tags: Consumer Protection
Organizations mentioned/involved: DOJ Access to Justice Initiative (ATJ), Housing and Economic Rights Advocates (HERA) (CA), National Association of Consumer Advocates (NACA)
In the mid-aughts, mortgage lenders regularly encouraged people to take on loans that they couldn’t afford to repay. Banks then repackaged these loans into complicated bundles that they resold—in some cases, without the banks disclosing that they knew that these bundles, known as mortgage-backed securities, were not such a great investment. Bank of America and companies that it had acquired were among those that did this.
What followed is well-known.
People who couldn’t afford to pay their mortgage fell into deeper debt when the housing market collapsed. Unprecedented numbers of them had their homes foreclosed. People called for the government to fix the problem—by changing bankruptcy law, for example, or by forcing banks to lower the principal on loans for underwater homeowners—but the government’s cornerstone program, a loan-modification program called HAMP, has been less effective than people had hoped.