Supreme Court Helps The Foreclosure Fight

The Fight Against Foreclosure, Illegal Foreclosure Filings and the Ongoing Discovery into Mortgage Lender Violations has a friend in the Supreme Court

Here is something that you probably did not read in your local newspaper or saw on the news… In a surprising 5-4 vote, the Supreme Court ruled that national banks are still subject to the laws of the states they operate in. What made the ruling unusual is that Justice Scalia wrote the opinion and the other four conservative judges were in dissent (Roberts, Thomas, Alito and the normal swing vote Kennedy).

The ruling overturned an appeals court ruling that said that state attorneys general cannot investigate banks if they operate in more than one state.

The case in question involved the enforcement of fair lending laws in N.Y. State, specifically allegations that some banks were charging minorities higher interest rates. Instead, even though these are state laws, the appeals court had said that only the Office of the Comptroller of the Currency (OCC) had the power to investigate. In practice, this means that the laws were null and void, since the OCC has a lousy track record on such issues. Here is The Summary of the Case

“This is a huge win for consumers across the nation,” said Andrew Cuomo, the attorney general for the state of New York, in a statement.

The case began in 2005 when Cuomo’s predecessor, Eliot Spitzer, asked banks for information about their lending practices. The banks sued to block the probe, and lower courts agreed with the banks. Spitzer had threatened to issue subpoenas to get the data.

The Supreme Court ruled that Spitzer could not have issued subpoenas, but was allowed to bring an enforcement action if violations were uncovered. States are free to pursue investigations of banks for consumer protection issues in courts, the ruling said.

The Clearing House, the banking group that brought the suit, said it was “disappointed” with the decision. Another bank group, the Financial Services Round-table, went even further, saying that the decision “will create a patchwork of 50 state laws that destroys the efficiencies of the national market.” Sounds Like Sour Grapes to Me!

The Key Problem has been that Enforcing state laws is simply not a priority for a division of the Treasury Department.  And has caused jurisdictional problems for foreclosure defense. While clearly there can be a problem if multiple agencies have jurisdiction in regulation, allowing things to slip through the cracks, there can also be problems when there is only one regulator and that regulator is in the pocket of the regulated. It is harder to capture all 50 state attorneys general and the OCC, than it is just the OCC alone. Make no mistake, the head of the OCC, John Dugan, a holdover from the last administration, is very much a creature of the big banks he is supposed to be overseeing. The OCC ranks just behind the OTS in being an ineffectual regulator during the bubble.

While the state attorneys general will not be able to issue subpoenas on their own authority (they need approval from a state judge), it does mean that they do not have to sit on their hands if they think the banks are breaking the law. It also will mean a more fair application of the law and your legal rights.

If the appeals court ruling had been allowed to stand, then the state attorneys general would have been free to go after a little community bank that only operated in their state, but unable to go after the big banks like J.P. Morgan , Bank of America , Citigroupand Wells Fargo that dominate the banking business. Sort of like telling them, yeah, it’s okay for the state to go after the street level drug traffickers, but not allowed to go after the kingpins.

This is a major win for consumer protection, and a loss for the banks. It is also a big win for states in the ongoing struggle between state and federal jurisdiction. I guess the Supreme Court is not as susceptible to campaign contribution influence as the Congress is. Thanks to Dirk van Dijk and Greg Robb, MarketWatch For First Making this Important issue Available !…

The fight against foreclosure is only beginning, stay tuned for more about the mortgage mess and lender violations. Together we will Stop Illegal Foreclosures and give ourselves equal access to the law regarding predatory lending as it should be!