Consumer Law

Carrillo on Consumer Challenges to Adjustable Rate Mortgages

By Jeff Sovern

Jo J. Carrillo of Hastings has written Dangerous Loans: Consumer Challenges to Adjustable Rate Mortgages, 5 Berkeley Bus. L. J. 1 (2008).  This article has the distinction of having two abstracts.  Here's the SSRN abstract:

This article analyzes the relationship between innovative mortgage products, like adjustable-rate mortgages, and the first wave of consumer legal challenges brought against those products under the Truth in Lending Act (TILA), 15 U.S.C. section 1601, et seq. (TILA).

And here's the more-detailed abstract at the beginning of the article:

As recently as the first quarter of 2007, home ownership rates were up across the board, including in low-income, fixed-income, and minority communities. By the fourth quarter of 2007, sales volume had flattened, housing prices had peaked or dropped, interest rates for consumers were uncertain, and mortgage lenders had tightened access to credit. Additionally, notices of default rose, as did forced (equity) sales, and completed foreclosures as measured by trustee deeds of sale filed.

This article analyzes the relationship between innovative mortgage products, like adjustable-rate mortgages, and the first wave of consumer legal challenges brought against those products under the Truth in Lending Act (TILA), 15 U.S.C. section 1601, et seq. (TILA). Legislation has been introduced to address the rise in mortgage distress among consumers, but much of that legislation is limited in application. Hence, by default, courts will continue to play an important role in resolving consumer claims against lenders, and many of the lawsuits will be brought as class actions. TILA explicitly allows class action lawsuits for damages under section 1640, but section 1635, which covers rescissions, is silent on the question of whether class-wide rescission claims are permissible. On the legal side, the answer will depend upon how courts interpret section 1635 in light of TILA?s overall consumer protection purpose. On the economic side, the answer will depend upon how access-to credit issues get framed in light of the expanding mortgage crisis.

Full post as published by CL&P Blog on November 29, 2008 (boomark / email).