In her continuing focus on the reckless mortgage lending that led to the 2008 financial crisis and its aftermath, Law Professor Kathleen C. Engel has published an article arguing for policies that would “expand localities’ power to protect against actions by financial institutions that threaten or impose costs on communities.”
In “Local Governments and Risky Home Loans,” published in Southern Methodist University Law Review, she also introduces models for local regulation of home mortgage lending.
Cities and towns across the nation face the blight of foreclosed and abandoned homes, even though many tried to stop the risky loans before they took their toll on residents and neighborhoods.
“Their pleas were dismissed and their ordinances overturned,” writes Engel. “A handful of cities have sued financial institutions, attempting to recover their losses. The lawsuits have been complex and expensive, and limits on municipal standing have dramatically restricted the relief cities can recover.”
Engel is a research professor of law at Suffolk University Law School and author of The Subprime Virus: Reckless Credit, Regulatory Failure, and Next Steps.
She recently was quoted in the article “Crises Hidden in Plain Sight: Homelessness and Housing Affordability,” published on the WhoWhatWhy website of investigative journalism.
“Some of the ways the federal government handled loans in default actually exacerbated the distress in blighted communities," Engel told WhoWhatWhy. "For example, in order to replenish funds in the Federal Housing Administration insurance program, HUD decided to sell Federal Housing Administration-insured loans that were in default to the highest bidders, primarily private equity firms. The problem with this approach is that private equity firms had no interest or expertise in stabilizing neighborhoods.”