Legislative Memos

Click below to explore the team’s research on the legislation surrounding the housing market. Above each memo is an executive summary of its contents— click the link to explore the full analysis.

Federal Legislation

A Primer on the 1994 Home Ownership and Equity Protection Act

Author: Kate Karstens

Published: April 15th, 2020

The 1994 Home Ownership and Equity Protection Act (“HOEPA”) amended the Truth in Lending Act (“TILA”) with regard to its consumer protection guidelines on homeownership lending. This memo examines the role of HOEPA in the context of the federal and state legislative schemes and its role in the housing crash and subsequent global financial meltdown.HOEPA sought to address a series of problems in residential mortgage lending: negative amortization, balloon payments, disclosures, and reverse redlining. During the 1980s and early 1990s, investigative journalists had published several articles that explored the landscape for borrowers who struggled to pay off mortgages due to fees or high interest rates. Congressional hearings from 1993 further explored constituents’ experiences with predatory lending in the mortgage market, and legislative ideas to address these concerns. In the final legislation, Congress charged the Federal Reserve Bank (“the Fed”) with enforcement of HOEPA. This memo discusses HOEPA’s background, context, and content to illuminate the regulatory environment for mortgage lending in the decade preceding the 2008 Crisis. Although the Act’s enforcement mechanisms laid the groundwork for curbing predatory lending at the federal level, the Federal Reserve Bank failed to adequately enforce the Act. This stance facilitated a wildfire of predatory lending practices that ensued in the decade to follow. The memo also briefly sketches a 2013 rule adopted by the Consumer Financial Protection Bureau, which tightened up federal oversight of mortgage lending, to provide context on the present-day federal landscape of mortgage lending consumer protections.

The Financial Services Modernization Act of 1999

Author: Despina Chouliara

Published: April 25th, 2020

The Financial Services Modernization Act of 1999, otherwise known as the Gramm-Leach-Bliley Act (“GLBA”), repealed banking regulations from the 1930s – the Glass-Steagall (1933) and the Bank Holding Company Act (1956). Those laws prevented the merger of commercial banks, stock brokerage companies, and insurance companies. GLBA also introduced the Financial Privacy Rule and the Safeguards Rule, which required financial institutions to explain their information-sharing practices to their customers and to safeguard sensitive data, respectively. In enacting GLBA, Congress aimed to “modernize” the financial services industry. By annulling Glass-Steagall and Bank Holding Company Act protections, GLBA encouraged consolidation in the financial services industry. Financial services companies created financial holding companies, which were now overseen by the Federal Reserve. Experts continue to debate the lasting effects of this act. Critics often argue that GLBA contributed to the financial crisis of 2008 by deregulating the banking sector and removing restrictions on commercial bank securities activities. GLBA supporters contend that not passing GLBA, or later repealing it, would not have prevented the financial crisis, which resulted from bad investments by large, poorly capitalized financial institutions.

State Legislation

COMING SOON: Comparison of State Predatory Lending Laws and the Federal Regulatory Response: North Carolina, Georgia, and Massachusetts

Author: Charlie Zong

By the late 1990s, state regulators and legislators were unsatisfied with federal mortgage lending protections in TILA and HOEPA. The majority of states enacted state-level mortgage lending regulations that imposed additional regulatory structure on mortgage industry activity, including some state laws prohibiting specific practices viewed as predatory lending. These state laws had key differences between them regarding the extent of their limitations on lending practices and the degree of regulatory oversight of the mortgage industry generally. The federal bank and financial regulators (OCC, FDIC, OTS) also had an important role in bank regulation because they regulated nationally chartered banks and hence had the ability to preempt state laws for those banks. State-federal collaboration, and often, the lack thereof, was an important dynamic affecting the efficacy of predatory lending regulation in the lead-up to the 2008 financial crisis.

COMING SOON: The 1999 North Carolina Anti-Predatory Lending Law: Dissecting Regulatory Components and Implications

Author: Jessie Xu

The 1999 Anti-Predatory Lending Law set the regulatory landscape against abusive and predatory lending practices in North Carolina leading up to the 2008 Financial Crisis. Therefore, it is crucial to understand the legislative components of such legislation, including its origins from the North Carolina General Statutes. We also discuss the implications of the law on the 2008 Financial Crisis.