Banking Law

No Matter How Hopeless, Fight On

The opponents of tax anticipation loans are not giving up their fight (paid subscription required) to restrict those loans, notwithstanding the recent ruling of the US Sixth Circuit Court of Appeals that held that state laws that limit tax preparers who originate such loans are preempted by federal law when the tax preparers are originating the loans on behalf of national banks.

Chi Chi Wu, a staff attorney for the National Consumer Law Center in Boston, said groups like hers would continue to call for restrictions on these loans, because they have "triple-digit APRs." Ms. Wu wrote an amicus brief for the case on behalf of the state of Connecticut. Consumer advocates are paying particularly close attention to a proposal the Internal Revenue Service made in January that would prohibit tax preparers from disclosing or using taxpayer return information for the purpose of marketing refund anticipation loans. That proposal is still in the public comment period.

Expect the wars against these bottom-feeding loans to rage on. Incidentally, Ms. Wu's cousin, Cha Cha, opted to give up the fight and audition for "Dancing With The Stars."

Equally determined to never say "never" are advocates of seller-funded downpayment assistance (DAP) for FHA loans. Yesterday was the first day that DAP was effectively zapped by the Housing and Economic Recovery Act. In an article in yesterday's "Housing Wire," reporter Diana Golobay almost sang "Ding, dong, the DAP is dead."

It?s official. Down payment assistance ? DAP or DPA to most industry participants ? has gone the way of the Tyranosaurus Rex, independent Wall Street investment banks and the even textbooks that once suggested Pluto as the outermost planet in our solar system. That is to say that DPA is no more, effective today.

Well, I don't know about T. Rex being kaput. Plenty of associates in major law firms would say that their firms' managing partners are dinosaurs and that they're unfortunately alive and kicking.

The proponents of DAP--the nonprofit corporations that were paid a fee by homebuilders to launder pass-through the "donated" downpayment assistance through to the homebuyer/borrower--are also trying to sound Churchillian.

Nonprofit groups, including giants such as Sacramento-based Nehemiah Corp. of America, are now either out of business or looking to other lines of business while they continue to lobby Congress to reinstate the controversial FHA program. Efforts to pass a bill that would reinstate DPA stalled in a House committee, however, as concern over a historic financial bailout package pushed down payment program concerns to the back burner in the past few weeks.

Nehemiah hosted a media teleconference Wednesday that saw company president and CEO Scott Syphax vow to fight for the restoration of the program.

?It ain?t over yet,? said Syphax. ?Regardless of the outcome in the next 48 hours or so, we will continue to press forward on behalf of the interests of working-class families and the communities they reside in across the country.??

Yep, that's what we need right now: mortgage loans, backed by federal insurance, with a much higher default rate. Good luck, Scott!

Full post as published by Bank Lawyers Blog on October 02, 2008 (boomark / email).