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EDITORIAL
Our view: Bring down predatory lenders with an organized crime investigation
Foreclosure surge demands a grand jury probe
Sunday, December 03, 2006
Montgomery County already has surpassed its old record for foreclosure filings on home mortgages. Setting a new record had been an annual event for years, as filings more than tripled from 1,319 in 1997 to 4,281 in 2003.
The grim statistic leveled off at around 4,000, but then started to rise again this year. The 2006 tally reached 4,385 by mid-November. That represents 48 percent of the Common Pleas Courts' civil caseload.
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Total foreclosure filings during the past 10 years now exceed 31,000. Borrowers did not lose their homes in all cases, and some may be repeat filings for the same property.
But the cumulative number is staggering when you consider that Montgomery County has 146,237 owner-occupied housing units, according to 2005 census estimates. And, for a decade, Gov. Bob Taft, his anemic Commerce Department and Attorneys General Betty Montgomery and Jim Petro have done almost nothing to expose what's behind the epidemic.
Strickland, Dann must
clean up old mess
Incoming Gov. Ted Strickland and Attorney General Marc Dann need to get to the bottom of Ohio's foreclosure surge and launch regulatory and criminal — yes, criminal — investigations into the lending practices that have contributed to the skyrocketing rate.
Every couple of years, a scandal breaks in which a national mortgage lender is charged with engaging in schemes to systematically cheat consumers. But, every time, state and federal regulators have allowed the wrong-doers to buy their way out of trouble.
Large fines have been levied, but no one has been criminally charged. High-profile executives haven't lost their jobs. Few regulatory reforms have been enacted. In fact, investigative files typically have been kept under seal, while offending companies continue in business without missing a beat. Meanwhile, injured consumers have received pennies on the dollar for their losses.
At long last the time has come for zero tolerance. Mr. Strickland, for starters, must clean house at the Department of Commerce and appoint a director willing to use the agency's broad regulatory power over state banks, finance companies and mortgage brokers to protect the public and to provide a detailed accounting of why so many Ohio mortgages are in default.
Mr. Dann will have unprecedented power to go after predatory lenders and brokers when he takes office as attorney general — thanks to Senate Bill 185, a strong pro-consumer bill that passed the legislature after a long fight and only when it was beyond dispute that Ohio had become a haven for unscrupulous lenders, and mortgage foreclosures had reached crisis proportion.
But the sweeping protections only apply to transactions that occur after the law takes effect in January. Where does that leave the legion of consumers who were casualties of lending scams predating the new law?
Mr. Dann can't ignore this long neglected and still unfinished business. As attorney general, he will chair Ohio's Organized Crime Investigations Commission — a bipartisan group of law-enforcement officials who supervise a high-powered team of federal and state prosecutors and investigators.
Treat lending scams for what they are — fraud and theft
The commission's purpose is to investigate complex criminal enterprises that operate across county lines — including white-collar financial fraud that county prosecutors preoccupied with street crime aren't well-equipped to tackle.
Predatory mortgage lenders can constitute just such a criminal enterprise. Schemes that target unsophisticated consumers and extract premium fees for worthless products and dishonest services should be treated for what they are: fraud and theft. Financial institutions that aid or abet such conduct can cross the line and be treated as co-conspirators.
These issues need to be sorted out as part of a systematic investigation that makes use of grand jury subpoena power. The process should start with consumer advocates throughout the state developing a uniform method for summarizing information from the predatory-lending cases that fill their bulging file drawers and then jointly submitting this information to the Ohio Organized Crime Investigations Commission.
Then the investigators should go where the evidence leads them.
Ohio families that have lost their homes — and communities that have been devastated by predatory mortgage lenders — can't be ignored or denied any longer. They deserve justice.
