Tainted loans: The value of a mass torts approach in subprime mortgage litigation

University of Cincinnati Law Review

Volumn 78, Issue 1, 2009, Pages 1-79

  Brescia, Raymond H ^a  

^a ALBANY LAW SCHOOL   (United States)

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EID: 77950394227     PISSN: 00096881     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Review

References (495)

1. U.S. Sec. & Exch. Comra'n, Excerpts of E-Mails From Angelo Mozilo, http://www.sec.gov/news/press/2009/2009-129-email.htm(last visited Jun. 9, 2009). David Sambol was the former Chief Operating Officer and one-time Acting Chief Executive Officer of Countrywide Financial Corporation.
2. See Press Release, U.S. Sec. & Exch. Comm'n, SEC Charges Former Countrywide Executives With Fraud (Jun. 4, 2009), available at http://www.sec.gov/news/press/20O9/2OO9-129.htm.
3. For background on and overview of the subprime mortgage crisis, see, generally, EDWARD M. GRAMLICH, SUBPRIME MORTGAGES: AMERICA'S LATEST BOOM AND BUST 9-35 (2007) (providing analysis of trends in homeownership from the 1940s to the 2000s);
4. JOHN BELLAMY FOSTER & FRED MAGDOFF, THE GREAT FINANCIAL CRISIS: CAUSES AND CONSEQUENCES (2009);
5. DANIEL GROSS, DUMB MONEY: HOW OUR GREATEST FINANCIAL MINDS BANKRUPTED THE NATION (2009);
6. RICHARD A. POSNER, A FAILURE OF CAPITALISM: THE CRISIS OF 08 AND THE DESCENT INTO DEPRESSION (2009);
7. ROBERT J. SHILLER, THE SUBPRIME SOLUTION: HOW TODAY'S GLOBAL FINANCIAL CRISIS HAPPENED, AND WHAT TO DO ABOUT IT 29-38, 87-113 (2008) (attributing the subprime mortgage crisis to irrational expansion of housing values);
8. MARK ZANDI, FINANCIAL SHOCK: A 360° LOOK AT THE SUBPRIME MORTGAGE IMPLOSION, AND HOW TO AVOID THE NEXT FINANCIAL CRISIS (2009) (reviewing origins of the financial crisis);
9. Raymond H. Brescia, Capital in Chaos: The Subprime Mortgage Crisis and the Social Capital Response, 56 CLEV. ST. L. REV. 271 (2008) (attributing rise of subprime mortgage products to deregulation and conduct of brokers and lenders to breakdown in the traditional borrower-lender relationship);
10. Possible Responses to Rising Mortgage Foreclosures: Hearing Before the H. Comm. on Fin. Servs., 110th Cong. 19-21 (2007) [hereinafter Possible Responses] (statement of Sheila C. Bair, Chairman, Fed. Deposit Ins. Corp.) (assessing trends in securitization of subprime mortgage debt within the past ten years);
11. Mortgage Market Turmoil: Causes and Consequences: Hearing Before the S. Comm. on Banking, Hous., and Urban Affairs, 110th Cong. (2007) [hereinafter Mortgage Market Turmoil] (testimony of Roger T. Cole, Dir., Div. of Banking Supervision and Regulation) (discussing the impact of subprime lending);
12. Allan N. Krinsman, Subprime Mortgage Meltdown: How Did It Happen and How Will It End?, 13 J. STRUCTURED FIN. 13 (2007) (providing overview of the origins of the subprime mortgage market);
13. Souphala Chomsisengphet & Anthony Pennington-Cross, The Evolution of the Subprime Mortgage Market, 88 FED. RES. BANK OF ST. LOUIS REV. 31(2006) (same).
14. See Todd J. Zywicki & Joseph D. Adamson, The Law and Economics of Subprime Lending, 80 U. COLO. L. REV. 1, 5-7 (2009);
15. Sally Pittman, Comment, ARMs, But No Legs to Stand On: "Subprime" Solutions Plague the Subprime Mortgage Crisis, 40 TEX. TECH L. REV. 1089, 1093-94 (2008);
16. PATRICIA A. MCCOY & ELIZABETH RENUART, The Legal Infrastructure of Subprime and Nontraditional Home Mortgages, in BORROWING TO LIVE: CONSUMER AND MORTGAGE CREDIT REVISITED (Nicolas P. Retsinas & Eric S. Belsky eds., 2008).
17. A loan generally considered subprime typically has several distinct features when compared to a prime loan: higher upfront costs; a higher interest rate; and an adjustable interest rate that follows a brief period of a low, introductory rate. Chomsisengphet & Pennington-Cross, supra note 2, at 32. For a discussion of the removal of interest rate caps
18. see Cathy Lesser Mansfield, The Road to Subprime "Hel" was Paved with Good Congressional Intentions: Usury Deregulation and the Subprime Home Equity Market, 51 S.C. L. REV. 473, 492 (2000);
19. Eamonn K. Moran, Wall Street Meets Main Street: Understanding the Financial Crisis, 13 N.C. BANKING INST. 5, 21 (2009);
20. Pittman, supra note 2, at 1093;
21. Zywicki & Adamson, supra note 3, at 6.
22. Moran, supra note 4, at 21-22.
23. Id. at 32-33.
24. See Brescia, supra note 2, at 291-98;
25. see also John Kiff & Paul Mills, Money for Nothing and Checks for Free: Recent Developments in U.S. Subprime Mortgage Markets 7, 11 (Int'l Monetary Fund, Working Paper, No. 188, 2007);
26. Krinsman, supra note 2, at 14;
27. Subprime Mortgage Market Turmoil: Examining the Role of Securitization: Hearing Before the Subcomm. on Sec, Ins., and Invs. of the S. Comm. on Banking, Hous. and Urban Affairs, 110th Cong. (2007) [hereinafter Subprime Mortgage Market Turmoil] (testimony of Kurt Eggert, Professor of Law, Chapman Univ. School of Law);
28. Subprime Mortgage Market Turmoil, supra (testimony of Christopher L. Peterson, Assoc. Professor of Law, Univ. of Fla.);
29. ZANDl, supra note 2, at 95.
30. Krinsman, supra note 2, at 14.
31. ZANDI, supra note 2, at 79-81.
32. Moran, supra note 4, at 34-35.
33. See id. at 36-40.
34. The securitization of subprime mortgages is at the heart of the crisis. This process converted future income streams for mortgage lenders into present assets, permitted investors to invest in the U.S. housing market, and shifted the risk of default from the lender who assessed the prospective borrower's creditworthiness to the investors, who would not have an opportunity to do so, but would trust the ratings agencies' analysis of the loans that backed the securities in which they were investing. Lenders made loans for the purposes of selling them on the secondary mortgage market, sometimes days or even hours after those loans were consummated. Bundles of loans were packaged and sold to a separate entity, often called a Special Purpose Vehicle (SPV). The transfer of these assets to the SPV would generate fees for the mortgage lender, and such entities made soaring profits on such transactions as investment banks and other entities that packaged these loans clamored for more and more of these deals. The SPV created would then issue securities that investors would purchase, with return on those investments derived from the future mortgage payments the borrowers were committed to paying. Classes of interests were created, and the "higher" or more secure classes could expect their payments made first, even if the mortgages were not all performing. In addition to converting future income streams into present, liquid assets for the lender, another goal of the securitization process was to spread the risk of default on the mortgages, so that even some non-performing loans could be absorbed without risk to the overall success of the investments. For an overview of the securitization process,
35. see Brescia, supra note 2, at 290-91;
36. ZANDI, supra note 2,115-116 Apparently, the models on which these vehicles were built did not anticipate the downturn in the housing market, the inability of the borrowers to meet their obligations and staggering default rates on the underlying mortgages.
37. See GROSS, supra note 2, at 50;
38. Moran, supra note 4, at 34.
39. For an overview of the credit default swap market and its demise, see Aaron Unterman, Innovative Destruction- Structured Finance and Credit Market Reform in the Bubble Era, 5 HASTINGS BUS. L.J. 53,66-72 (2009).
40. In the waning days of the Clinton Administration, a bill that enjoyed strong bipartisan support ultimately was passed into law that prevented regulatory agencies from attempting to regulate credit default swaps and other types of commodities. This feat of "non-regulation" played no small role in the financial crisis. See Commodity Futures Modernization Act of 2000, 7 U.S.C. §§1-27f (2006). For an overview of the role of credit default swaps in increasing and encouraging risky investment practices,
41. see POSNER, supra note 2, at 56-60. In 2002, in the wake of the Enron scandal, Frank Portnoy, in a moment of remarkable prescience not uncommon for him, testified before Congress as follows: Congress made the deregulated status of derivatives clear when it passed the Commodity Futures Modernization Act. As a result, the [Over the Counter] derivatives markets have become a ticking time bomb, which Congress thus far has chosen not to defuse.
42. Enron and Derivatives: Hearing Before the S. Comm. on Gov. Affairs, 107th Cong. (2002) (testimony of Frank Partnoy), available at http://ssm.com/ abstract=302332.
43. See Moran, supra note 4, at 17.
44. In addition, many brokers had conflicting loyalties with the borrowers on whose behalf they were supposedly working. An example of a practice within the mortgage industry that revealed the obvious conflicts of interest the drive to securitize created is the socalled "yield spread premium" (YSP). The YSP is a method used by the mortgage originators for compensating the mortgage broker for the loans he or she is able to secure for that originator. To determine the compensation paid to a broker if a YSP was used in a particular transaction, the originator would assess a prospective borrower's creditworthiness and inform the broker of the interest rate the originator would be willing to offer to that borrower. If the broker could convince the borrower to accept a loan at a higher interest rate from the lender, he or she would be paid the difference between the rate the lender would offer the borrower and the rate of the loan ultimately accepted. Of course, the borrower would be unaware that the lender was willing to offer him or her a loan at a lower rate. See Howell E. Jackson & Laurie Burlingame, Kickbacks or Compensation: The Case of Yield Spread Premiums. 12 STAN J. L. BUS. & FIN. 289, 291-292 (2007).
45. See Moran, supra note 4 at 24-25 (discussing how banks instituted aggressive and eager lending practices).
46. See GROSS, supra note 2, at 37;
47. Krinsman, supra note 2, at 15, 17;
48. Moran, supra note 4, at 21-22.
49. Moran, supra note 4, at 30-31.
50. See id. at 33 (discussing how the securitization process "disperse[s] risk amongst a wide group of investors and decrease[s] risk exposures of financial institutions").
51. Krinsman, supra note 2, at 16;
52. Mortgage Market Turmoil, supra note 2, at 3 (testimony of Roger T. Cole, Dir., Div. of Banking Supervision and Regulation).
53. th Cong. 116 (2007) [hereinafter Role of the Secondary Market] (testimony of Warren Kornfeld, Managing Dir., Moody's Investors Serv.).
54. Possible Responses, supra note 2, at 4 (statement of Sheila C. Bair, Chairman, Fed. Deposit Ins. Corp.);
55. see also Kiff & Mills, supra note 7, at 13.
56. The Congressional Oversight Panel has identified several ways that securitization agreements, often referred to as "Pooling and Servicing Agreements" (PSAs), limit the extent to which a servicer can modify a securitized mortgage. Such agreements can forbid loan modifications altogether, can limit the percentage of loans in a particular pool that can be modified, may permit modification of only one feature of a particular loan (such as the interest rate or monthly payments), may require consent of 100% of all investors to modify any loans, and can require servicers to buy back from the investors mortgages those servicers wish to modify. Due to these limitations, servicers are reluctant to pursue modifications for fear they will face litigation by investors for modifying loans in violation of PSA restrictions. In addition, the servicer compensation structure of such agreements may also discourage servicers from pursuing modifications, where, for example, modifications of particular loans result in the payment of lower mortgage premiums, which, in turn, reduce the payments the servicers receive for servicing such loans. See CONGRESSIONAL OVERSIGHT PANEL, MARCH OVERSIGHT REPORT, FORECLOSURE CRISIS: WORKING TOWARDS A SOLUTION 42-47 (2009), available at http://cop.senate.gov/ documents/cop-030609-report.pdf [hereinafter COP MARCH '09 REPORT] (outlining barriers to loan modifications). Recent preliminary research into the explicit terms of these agreements does show that modifications are often possible by the express terms of those agreements, however. This research reveals the following: less than 10% of PSAs contain outright bans on loan modifications; 64% of PSAs require "reasonably foreseeable default" before "material" modification; for these 64% of loans requiring reasonably foreseeable default, some require that any loan modification must be carried out in the interests of the investors or the trust, and/or that the servicer treat these loans as it would loans in its own portfolio; some restrict modifications up to 5% of the loan pool.
57. See John P. Hunt, What Do Subprime Securitization Contracts Actually Say About Loan Modification? Preliminary Results and Implications (Mar. 25, 2009) (Berkeley Ctr. For Law, Bus. and the Econ.), available at http://papers.ssm.com/ sol3/papers.cfm?abstract-id=l 369286.
58. PEW CHARITABLE TRUSTS, DEFAULTING ON THE DREAM: STATES RESPOND TO AMERICA'S FORECLOSURE CRISIS (2008), available at http://www.pewtrusts.org/ uploadedFiles/ (describing impact of foreclosures on municipalities). wwwpewtrustsorg/Reports/Subprime-mortgages/ defaulting-on-the-dream.pdf.
59. See ZANDI, supra note 2, at 171-172
60. See Stephen Gandel, Lenders Look Beyond Credit Scores to Gauge Who's a Risk, TIME, Jan. 9, 2009, available at http://www.time.com/time/business/ article/0,8599,1870450,00.html (describing increase in restrictions on lending and strengthening of underwriting criteria).
61. See COP MARCH '09 REPORT, supra note 22, at 6. ("When compared with the costs of foreclosure, the cost of loan workouts can often provide a more efficient, economically rational outcome for both the borrower and the lender, generally making foreclosure a lose-lose situation.").
62. See infra Part IV.D.
63. Robin J. Effron, Disaster-Specific Mechanisms for Consolidation, 82 TUL. L. REV. 2423, 2424 n.3 (2008).
64. Deborah R. Hensler, The Role of Multi-Districting in Mass Tort Litigation: An Empirical Investigation, 31 SETON HALL L. REV. 883, 887-888 (2001).
65. For the benefits of aggregation, see infra text accompanying notes 36-45.
66. Hensler defines mass torts as follows: Mass torts involve a common set of injuries that occurred in the same or similar circumstances- for example, a hotel fire, a building collapse, or widespread product use- and that are allegedly linked to the actions of a single or small number of defendants. Plaintiffs and defendants are represented by a small number of law firms (relative to the magnitude of the litigation), and a single or small number of judges frequently manage the litigation because of aggregative procedures such as multidistricting and class action certification. Because of this high degree of commonality, the outcome of any one case within the litigation- regardless of whether it has been formally grouped with other such cases- is highly influential on the outcome of other cases. A single large plaintiff award for compensatory or punitive damages will increase the value not only of other pending cases asserting the same facts and legal doctrine but also of similar claims that may be filed in the future. A key doctrinal decision in a single case- for example, on the availability of market share liability- may presage the success or failure of massive litigation against particular defendants. In addition to numerosity, commonality, and interdependence of case values, many mass personal injury torts share three other features: controversy over scientific evidence of causation, emotional or political heat, and higher than average potential for claiming by allegedly injured parries.
67. Deborah R. Hensler, A Glass HaIf Full, a Glass Half Empty: The Use of Alternative Dispute Resolution in Mass Personal Injury Litigation, 73 TEX. L. REV. 1587, 1596 (1995) (footnotes omitted). Similarly, Richard Nagareda has articulated a "working definition" of mass torts as follows: "[M]ass torts" involve allegations of tortious misconduct affecting large numbers of broadly dispersed persons. The persons, in turn, complain of injuries that may remain latent for years or even decades but, when they do emerge, present a limited set of factual variations.
68. RICHARD A. NAGAREDA, MASS TORTS IN A WORLD OF SETTLEMENT viii (2007).
69. See infra Part III.A
70. For an overview of the use of multi-district litigation procedures, see L. Elizabeth Chamblee, Unsettling Efficiency: When Non-Class Aggregation of Mass Torts Creates Second-Class Settlements, 65 LA. L. REV. 157,190-97 (2004);
71. Hensler, supra note 29, at 893-895
72. Aggregation can be accomplished by the creation of a class action, with common factual or liability disputes handled on a class-wide basis, or through other types of techniques, such as statistical sampling to reach determinations on these disputes. See, e.g., Hilao v. Estate of Marcos, 103 F.3d 767 (9th Cir. 1996). For a review of statistical sampling techniques,
73. see Robert G. Bone, Statistical Adjudication: Rights, Justice, and Utility in a World of Process Scarcity, 46 VAND. L. REV. 561 (1993);
74. Michael J. Saks & Peter David Blanek, Justice Improved: The Unrecognized Benefits of Aggregation and Sampling in the Trial of Mass Torts, 44 STAN. L. REV. 815 (1992).
75. See also Alexandra D. Lahav, Bellwether Dials, 76 GEO. WASH. L. REV. 576, 589-634 (2008) (providing arguments for and against the use of bellwether trials as an aggregative technique). For an overview of the use of F.R.C.P. consolidation mechanisms,
76. see Chamblee, supra note 33, at 187-190
77. For an overview of aggregative techniques, see Saks & Blanek, supra note 34, at 817.
78. See also Judith Resnik, From "Cases" to "Litigation", 54 LAW & CONTEM?. PROBS. 5, 25-40 (1991) (providing overview of formal and informal aggregative techniques).
79. For the benefits of aggregation in mass torts cases generally, see Deborah R. Hensler, Resolving Mass Toxic Torts: Myths and Realities 1989 U. ILL. L. REV. 89 (1989) (providing overview of the advantages of aggregated solutions in mass tort cases).
80. See also Edward H. Cooper, Aggregation and Settlement of Mass Torts, 148 U. PA. L. REV. 1943, 1949 (2000) (outlining benefits of aggregation);
81. David Rosenberg, Class Actions for Mass Torts: Doing Individual Justice by Collective Means, 62 IND. L.J. 561, 581-82 (1987) (same);
82. David Rosenberg, The Casual Connection in Mass Exposure Cases: A "Public Law" Vision of the Tort System, 97 HARV. L. REV. 849 (1984) (same);
83. Saks & Blanek, supra note 34 (same);
84. Georgene M. Vairo, Georgine, The Dalkon Shield Claimants Trust, and the Rhetoric of Mass Torts Claims Resolution, 31 LOY. L.A. L. REV. 79, 95-110 (1997) (same);
85. Jack B. Weinstein, The Role of Judges in a Government of, by, and for the People: Notes for the Fifty-Eighth Cardozo Lecture, 30 CARDOZO L. REV. 1, 172-78 (2008) (same). For an argument that claim aggregation improves efficiency and consistency of outcomes,
86. see Edward F. Sherman, Introduction to the Symposium: Complex Litigation: Plagued By Concerns Over Federalism, Jurisdiction and Fairness, 37 AKRON L. REV. 589, 591 (2004). For an argument that mandatory aggregation tends to maximize these benefits,
87. see David Rosenberg, Mandatory-Litigation Class Action: The Only Option for Mass Torts Cases, 115 HARV. L. REV. 831, 840 (2002) ("Only mandatory-litigation class action enables the aggregation and averaging of claims that maximizes benefits from scale economies ... and from redistribution of claimrelated wealth to achieve optimal deterrence and insurance from mass tort liability.");
88. David Rosenberg, Mass Torts Class Actions: What Defendants Have and Plaintiffs Don't, 37 HARV. J. ON LEGIS. 393 (2000) (noting economies of scale of class actions). Such economies of scale are not limited to class action litigation, however.
89. See Byron G. Stier, Resolving the Class Action Crisis: Mass Tort Litigation as Network, 2005 UTAH L. REV. 863 (2005) (describing economies of scale obtained through litigation networks of lawyers in mass torts cases even outside the class action context).
90. Francis E. McGovern, Resolving Mature Mass Tort Litigation, 69 B.U. L. REV. 659, 659 (1989).
91. Id.
92. Fora discussion of the importance of maturity in the life cycle of a mass tort for making the most effective use of aggregative procedures, see REPORT OF THE ADVISORY COMMITTEE ON CIVIL RULES AND THE WORKING GROUP ON MASS TORTS TO THE CHIEF JUSTICE OF THE UNITED STATES AND TO THE JUDICIAL CONFERENCE OF THE UNITED STATES 22-25 (1999) [hereinafter REPORT OF THE ADVISORY COMMITTEE];
93. Peter H. Schuck, Mass Torts: An Institutional Evolutionist Perspective, 80 CORNELL L. REV. 941, 949 (1995). For an argument that maturity is not required for the use of collective procedures,
94. see David Rosenberg, Comment, Of End Games and Openings in Mass Tort Cases: Lessons from a Special Master, 69 B.U. L. REV. 695, 707-11 (1989). As Peter Schuck has pointed out, the maturation period can be a period of great creativity and experimentation.
95. Schuck, supra, at 976.
96. For a description of the economies of scale that plaintiffs' counsel can generate through handling a high volume of similar or aggregated cases, see Byron G. Stier, Resolving the Class Action Crisis: Mass Tort Litigation as Network, 2005 UTAH L. REV. 863,896-906 (2005).
97. Charles Silver, "We're Scared to Death": Class Certification and Blackmail, 78 N.Y.U. L. REV. 1357, 1358 (2003)
98. (quoting Newton v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 259 F.3d 154, 164 (3d Cir. 2001)).
99. For a discussion of the factors that lead to confidential settlements, see Jack B. Weinstein, Secrecy in Civil Trials: Some Tentative Views, 9 J.L. & POL'Y 53, 56-57 (2000) (noting that secrecy is often "the price of settlement").
100. See Deborah R. Hensler and Mark A. Peterson, Understanding Mass Personal Injury Litigation: A Socio-Legal Analysis, 59 BROOK. L. REV. 961 (1993).
101. For the benefits of aggregation of claims for defendants, see DEBORAH R. HENSLER ET AL., CLASS ACTION DILEMMAS: PURSUING PUBLIC GOALS FOR PRIVATE GAIN 102 (2000).
102. Some research also suggests that the likelihood of jury verdicts for defendants increases as the claims of more severely injured plaintiffs are aggregated with plaintiffs suffering only modest injuries. See Irwin A. Horowitz & Kenneth S. Bordens, The Effects of Outlier Presence, Plaintiff Population Size, and Aggregation of Plaintiffs on Simulated Civil Jury Decisions, 12 LAW & HUM. BEHAV. 209, 225 (1988) (noting that having a plaintiff with severe injuries in a consolidated action resulted in more verdicts for the defendants).
103. John Coffee, a vocal critic of mass tort class actions, concedes that there are benefits to claims aggregation: (1) it economizes on transaction costs or permits greater financial or other resources to be assembled to counteract the typically greater resources of the defendants, (2) it threatens risk averse defendants with greater liability and so deters them from going to trial, and (3) it avoids a 'race to judgment' among competing plaintiffs who fear either the impact of precedents in other related cases or that defendants' assets may be insufficient to fund the aggregate recoveries. John C. Coffee, Jr., The Regulation of Entrepreneurial Litigation: Balancing Fairness and Efficiency in the Large Class Action, 54 U. CHI. L. REV. 877,904 (1987).
104. See generally Stier, supra note 36, at 892-912 (2005) (describing benefits to counsel of pooling resources in the prosecution or defense of mass torts cases).
105. Rosenberg, Mandatory-Litigation Class Action, supra note 36, at 848 (noting additional benefit of class action treatment is that it motivates courts, as well as the parties, to invest resources in the litigation "so as to achieve optimal deterrence and insurance");
106. see also Saks & Blanek, supra note 34, at 815 ("Aggregation adds an important layer of process which, when done well, can produce more precise and reliable outcomes.").
107. See Hensler, supra note 29, at 891;
108. see also Resnik, supra note 35, at 60 (noting that aggregation of cases is "law generative": making more work for judges which means they pursue alternatives to adjudication).
109. See, e.g., JACK B. WEINSTEIN, INDIVIDUAL JUSTICE IN MASS TORT LITIGATION: THE EFFECT OF CLASS ACTIONS, CONSOLIDATIONS, AND OTHER MULTIPARTY DEVICES 63 (1995) ("When an attorney undertakes what is in essence a public litigation, he or she must be prepared for financial destruction as well as glory. The issues transcend traditional one client-one attorney relationships and conflicts. They involve whole communities.");
110. HENRY S. COHN & DAVID BOLLIER, THE GREAT HARTFORD CIRCUS FIRE: CREATIVE SETTLEMENT OF MASS DISASTERS (1991) (discussing various criticisms of mass tort claims, particularly the ethical restraints on judges);
111. Francis E. McGovern, Toward a Cooperative Strategy for Federal and State Judges in Mass Tort Litigation, 148 U. PA. L. REV. 1867, 1873 (2000) (criticizing the mass torts process and the manner in which settlements are reached).
112. Chamblee, supra note 33, at 170-77 (describing potential for collusion in settlement of mass torts claims);
113. see also Judith Resnik, Dennis E. Curtis & Deborah R. Hensler, Individuals Within the Aggregate: Relationships, Representation, and Fees, 71 N.Y.U. L. REV. 296 (1996) (outlining concerns about individual autonomy and access to justice in aggregate litigation and suggesting ways in which rules of ethics and procedure can strike balance between these and other competing principles);
114. Paul D. Rheingold, Ethical Constraints on Aggregated Settlements of Mass-Tort Cases, 31 LOY. L.A. L. REV. 395 (1998) (suggesting reforms to improve ethical conduct in the settlement of aggregate claims).
115. Many critics argue that plaintiffs' counsel are more interested in maximizing their own fees than securing the best deal possible for all of their clients. See, e.g., Barbara J. Rothstein, Francis E. McGovern & Sarah Jael Dion, A Model Mass Tort: The PPA Experience, 54 DRAKE L. REV. 621, 623 (2006) (discussing plaintiffs' counsel preference for quantity of claims rather than quality of claims due to their interest in collecting more sizeable attorney fees).
116. Frank M. McClellan, The Vioxx Litigation: A Critical Look at Trial Tactics, the Tort System, and the Roles of Lawyers in Mass Tort Litigation, 57 DEPAUL L. REV. 509 (2008). For a discussion of the ethical tensions in mass torts cases and class actions,
117. see, e.g., Jack B. Weinstein, Ethical Dilemmas in Mass Tort Litigation, 88 Nw. U. L. REV. 469, 494 (1994);
118. Georgene M. Vairo, 7Ae Dalkon Shield Claimants Trust: Paradigm Lost (or Found)?, 61 FORDHAM L. REV. 617, 619 n.9 (1992);
119. Hensler, supra note 36, at 96;
120. Michael D. Ricciuti, Equity and Accountability in the Reform of Settlement Procedures in Mass Tort Cases: The Ethical Duty to Consult, 1 GEO J. LEGAL ETHICS 817, 842 (1988);
121. John J. Donohue, III, The Effects of Fee Shifting on the Settlement Rate: Theoretical Observations on Costs, Conflicts, and Contingency Fees, 54 LAW & CONTEMP. PROBS. 195, 211 (1991). Over the last decade, the Supreme Court has addressed the issue of aggregate settlements in mass torts class actions, and, in both situations, found those settlements wanting.
122. In Amchem Products, Inc. v. Windsor, 521 U.S. 591 (1997),
123. the Court invalidated a proposed class action settlement that attempted to settle both present and future claims against twenty asbestos manufacturers for the failure on the part of the settlement to meet the strict requirements of Rule 23 of the Federal Rules of Civil Procedure. Specifically, the Court concluded that based on the large number of questions presented by several categories of class members, as well as to specific individuals within each specific category, it is not possible to meet the predominance standard of Rule 23(b)(3). Id. at 624.
124. Furthermore, the Court found that the requirements of Rule 24(a(4) were not met because there were several conflicts of interest between the named parties and those they sought to represent. Id. at 625. For instance, the Court noted that there was a great disparity in the awards between currently injured and "exposure-only" plaintiffs. See id. at 626. As a result, the settling parties achieved global compromise with "no structural assurance of fair and adequate representation for the diverse groups and individuals affected." Id. at 627.
125. Similarly, in Ortiz v. Fibreboard Corp., 527 U.S. 815 (1999),
126. a case in which the parties attempted to settle a so-called "limited fund" class action under F.R.C.P. 230(b)(1)(B), the Court found that the proposed settlement agreement did not meet the essential requirements of such a limited fund action. Specifically, the Court found several flaws in the agreement including (1) a failure to demonstrate that the fund was actually limited except by the agreement of the parties, and (2) the agreement showed exclusions from the class and allocations of assets at odds with the concept of limited fund treatment and the structural protections of Rule 23(a) as described in the Amchem case. Id. at 848.
127. First, because all assets were not yet liquidated the Court was concerned that the defendants had not established the upper limits of the fund with sufficient specificity to comply with Rule 23(b). Id. at 850.
128. Second, the Court was concerned with equity among the members of the class. Id. at 854.
129. Two issues were important for the Court in this respect: The inclusiveness of the class and the fairness of distributions to those within it. Id. As to the inclusiveness of the class, the Court found that the mandatory settlement class surely could not qualify when in the very negotiations aimed at the class settlement, class counsel agreed to exclude what could have turned out to be more than one third of all claimants. Id. at 854.
130. The Court also found that the agreement did not provide fairness to the class members because it did not have sufficient procedural mechanisms to properly award damages to dissimilarly situated class members. Id. at 855.
131. In fact, the Court noted that many of the conflicts of interests that were present in the Amchem case were also present in the proposed Ortiz class settlement. Id. at 856-57.
132. For a discussion of the impact oí Amchem and Ortiz on mass torts litigation generally, see Patrick M. Hanlon & Anne Smetak, Asbestos Changes, 62 N.Y.U. ANN. SURV. AM. L. 525 (2007);
133. see also Deborah R. Hensler, Has the Fat Lady Sung? The Future of Mass Toxic Torts, 26 REV. LlTIG. 883,922 (2007) (arguing that, as of 2007, mass torts practice "remains vibrant" after Amchem and Ortiz decisions). For a discussion of ways to compensate present and future claimants equitably in the context of mass torts settlements,
134. see Deborah R. Hensler, Bringing Shutts Into the Future: Rethinking Protection of Future Claimants in Mass Tort Class Action, 74 UMKC L. REV. 585 (2006).
135. PETER W. HUBER, GALILEO'S REVENGE: JUNK SCIENCE IN THE COURTROOM 2-3 (1991) (coining term "junk science" for what is perceived as the use of questionable scientific evidence in litigation).
136. David Bernstein, Out of the Fryeing Pan and into the Fire: The Expert Witness Problem in Toxic Tort Litigation, 10 REV. LITIG. 117,120 (1990) (noting a witness broker's policy that "[i]f the first doctor we refer doesn't agree with your legal theory, we will provide you with the name of a second prospective expert.");
137. David E. Bernstein, Getting to Causation in Toxic Tort Cases, 74 BROOK. L. REV. 51, 61-69 (2008) (arguing that plaintiffs in mass torts cases have attempted to evade traditional standards of proof on issues of causation).
138. See RONALD J. BACIGAL, THE LIMITS OF LITIGATION: THE DALKON SHIELD CONTROVERSY (1990);
139. Judith Resnik, Managerial Judges, 96 HARV. L. REV. 374 (1982);
140. Peter H. Schuck, The Role of Judges in Settling Complex Cases: The Agent Orange Example, 53 U. CHI. L. REV. 337 (1986).
141. See, e.g., PETER H. SCHUCK, AGENT ORANGE ON TRIAL: MASS TOXIC DISASTERS IN THE COURTS 163 (1987) ("A well-meaning but overzealous judge may occasionally go too far and 'coerce' settlement, and [Judge] Weinstein himself has been accused of this.").
142. See id.
143. Mark Herrmann, From Saccharin to Breast Implants: Mass Torts, Then and Now, 26 LITIG. 50, 54(1999)
144. Roger H. Trangsrud, Mass Trials in Mass Tort Cases: A Dissent, 1989 U. ILL. L. REV. 69, 85 (1989) (arguing that on the eve of a mass torts trial Judge Judge Weinstein: "(1) warned counsel for plaintiffs that they might be held personally responsible by their clients for rejecting the proposed $180 million settlement; (2) led the parties to settle on that figure rather than a higher one because of his opinion that similar suits should not be encouraged in the future; and (3) misled the plaintiffs into believing that a higher figure was impossible because of the attitude of the defendants.").
145. See Weinstein, supra note 52, at 494.
146. Richard C. Ausness, Cigarette Company Liability: Preemption, Public Policy, and Alternative Compensation Systems, 39 SYRACUSE L. REV. 897, 955 (1988).
147. See Deborah R. Hensler, As Time Goes By: Asbestos Litigation After Amchem and Ortiz, 80 TEX L. REV. 1899(2002).
148. Id.
149. Id.
150. Id.
151. Ausness, supra note 61, at 956.
152. See generally Owen M. Fiss, Against Settlement, 93 YALE L.J. 1073, 1085-1087 (1984) (arguing that settling cases, while promoting peace between the parties, does not necessarily foster justice since the parties may agree to terms acceptable to mem, but not beneficial to society).
153. Weinstein, supra note 52, at 510.
154. See id. at 511-512
155. Id.
156. ALEXIS DE TOCQUEVILLE, DEMOCRACY IN AMERICA 257 (Harvey C. Mansfield & Dělba Winthrop eds. and trans., 2000) ("There is almost no political question in the United States that is not resolved sooner or later into a judicial question.").
157. For a discussion of methods that courts could utilize to handle this influx of foreclosure actions, see Raymond H. Brescia, Beyond Balls and Strikes: Towards a Problem-Solving Ethic in Foreclosure Proceedings, 59 CASE W. RES. L. REV. 305 (2009).
158. See, e.g., Kevin Johnson, Mortgage fraud probe snares 406 suspects, USA TODAY, June 20, 2008, at B2, available at http://www.usatoday.com/money/economy/ housing/2008-06-19-mortgage-ftaud-arrests-N.htm http://www.usatoday.com/money/ economy/housing/2008-06-19-mortgageftaud-arrests-N.htm (over 400 people charged with fraud-related charges as a result of "Operation Malicious Mortgage");
159. Gretchen Morgenson, S.E.C. Accuses Countrywide's Ex-Chief of Fraud, N.Y. TIMES, June 5, 2009, at Al (describing case against Mr. Mozilo including e-mails from Mr. Mozilo stating that certain Countrywide products were "toxic" and "poison");
160. Henri E. Cauvin, Major Mortgage Fraud is Alleged, WASH. POST, Apr. 28, 2009, at Bl, available at http://www.washingtonpost.com/wp-dyn/content/article/ 2009/04/27/AR2009042702342.html (describing a mortgage scam that netted in excess of $70 million).
161. See also John S. Pistole. Deputy Director, Federal Bureau of Investigation, Statement Before the House Committee on the Judiciary (April 1, 2009), available at http://www.fbi.gov/congress/congress09/pistole040109. htm(describing Federal Bureau of Investigation's efforts to combat mortgage and other financial frauds);
162. Lisa Madigan, Illinois Attorney General, Testimony to House Committee on Financial Services (March 20, 2009) (discussing actions taken by state attorneys general to protect consumers and pursue those perpetrating frauds).
163. The states include Arizona, California, Connecticut, Florida, Illinois, Iowa, Michigan, North Carolina, Ohio, Texas, and Washington.
164. See Complaint for Restitution, Injunctive Relief, Other Equitable Relief, and Civil Penalties, California v. Countrywide Fin. Corp., LC081846, (Cal. Super. Ct. filed June 24, 2008), available at http://ag.ca.gov/cms-attachments/ press/pdfs/nl 582-draft-cwide-complaint2.pdf (alleging, under California law, violations for deceptive advertising and unfair competition by pushing homeowners into mass-produced, risky loans for the sole purpose of reselling the mortgages on the secondary market);
165. Complaint, Connecticut v. Countrywide Fin. Corp., No.1207, (Conn. Super. Ct. filed Aug. 5, 2008), available at http://www.ct.gov/ag/lib/ag/consumers/ countrywidelawsuit.pdf(alleging a violation of the Connecticut Unfair Trade Practices Act and violations of state laws prohibiting unfair or deceptive acts or practices; seeking civil penalties);
166. Complaint for Injunctive and Other Relief, Illinois v. Countrywide Fin. Corp., 08CH22994 (Cook County Cir. Q. filed June 25, 2008), available at httt://www.ag.state.il.us/pressroom/2008-06/countrywide-complaint.pdf (alleging that Countrywide violated Illinois law by engaging in unfair and/or deceptive practices);
167. Final Judgment and Consent Decree, Indiana v. Countrywide Fin. Corp., Cause No. 76C01-0808-PL-652 (Steuben County Cir. Ct. filed Apr. 23, 2009), available at http://atgindsha01.atg.in.gov/cpd/docs/enforcement/GregZoeller- 624334-1.pdf http://atgindsha01.atg.in.gov/cpd/docs/enforcement/ GregZoeller624334-1.pdf(discussing violations of Indiana state law through the alleged engagement in deceptive and misleading practices that led to borrowers obtaining potentially risky and costly loans, ordering Countrywide to end listed deceptive practices, void the prepayment penalties on Countrywide originated loans, and void any portion of the Countrywide originated loans resulting from deceptive acts);
168. Complaint for Injunctive Relief, Damages, and Other Statutory Relief, Office of the Att'y Gen., Dep't of Legal Affairs, Florida v. Countrywide Fin. Corp., Case No.: 08 30105 03 (Fla. Cir. Ct. filed June 30, 2008), available at http://myfloridalegal.com/webfiles.nsf/WF/MRAY-7G5G7L/$file/ CountrywideComplaint.pdf http://myfloridalegal.com/webfiles.nsf/WF/MRAY7G5G7L/ $file/CountrywideComplaint.pdf (alleging a violation of Florida's Deceptive and Unfair Trade Practices Act);
169. Consent Judgment and Injunction, Ohio, ex. rel. Att'y Gen. Nancy H. Rogers v. Countrywide Fin. Corp., CV 08 680445 (C.P. Cuyahoga County filed Dec. 29, 2008), available at http://www.opif.ag.state.oh.us/opifimages/PIF2745.pdf (alleging violations of Ohio's consumer protection laws);
170. Plaintiff's Original Petition, Texas v. Countrywide Fin. Corp., Cause No. 2009 - 717 (Dist. Q. El Paso County filed Feb. 11, 2009), available at http://www.oag.state.tx.us/newspubs/releases/2009/021109countrywide-pop.pdf (alleging, under Texas law that Countrywide's actions are in violation of the Texas Deceptive Trade Practices Act);
171. see abo In re Countrywide Fin. Corp. Sec. Litig., No. CV-07-05295-MRP, 2009 WL 943271 (CD. Cal. Apr. 6, 2009).
172. See Complaint for Restitution, Injunctive Relief, Other Equitable Relief, and Civil Penalties, supra note 75.
173. Id.
174. See also CAL. BUS. & PROF. CODE §§17203,17535 &17536 (West 2008). Among other relief, the suit seeks civil fines for violations of Business and Professions Code Section 17535, as well as an injunction against Countrywide from making untrue or misleading statements in violation of Business and Professions Code Section 17500, including untrue or misleading statements.
175. See Complaint for Injunctive Relief, Damages, and Other Statutory Relief, supra note 75.
176. The suit alleged a violation of Florida's Deceptive and Unfair Trade Practices Act. See FLA. STAT. §501.201-213 (2007). The claims allege that Countrywide engaged in predatory lending practices by telling customers interest rates were fixed when they were adjustable and misrepresenting the length of teaser rates and long-term higher rates, thus allowing brokers who knew Countrywide would write these mortgages to target the most financially unsophisticated segment of the population. Additionally, Countrywide hid any
177. See Consent Judgment and Injunction, supra note 75.
178. See Ohio Consumer Sales Practices Act, OHIO REV. CODE ANN. §1345.01-1345.13 (West 2008).
179. Stipulated Judgment and Injunction, California v. Countrywide Fin. Corp., LC081846, (Cal. Super. Ct. filed Oct. 20, 2008), available at http://ag.ca.gov/cms-attachments/press/pdfs/n 1618-cw-judgment.pdf.
180. Andrew Harris, Countrywide Settles Fraud Cases for $8.4 Billion, BLOOMBERG, Oct. 6, 2008, available at http://www.bloomberg.com/apps/news?pid= 20601087&sid=aWdK8sUC0Lf0&refer=home. This settlement dwarfed an earlier settlement with other subprime lenders.
181. See Press Release, Iowa Office of the Attorney General, States Settle With Household Finance: Up to $484 Million for Consumers (Oct. 11, 2002), available at http://www.iowa.gov/government/ag/protecting-consumers/2002-news/ 10-ll-2002.html. Similarly, in 2006, forty-nine states and the District of Columbia settled an action against the large subprime lender Ameriquest Mortgage Company. That settlement resulted in Ameriquest setting aside $295 million as restitution to borrowers and another $30 million to the states for consumer education, investigation and enforcement.
182. See Largest Subprime Lender Agrees to $325 Million Settlement, 24 NCLC REPORTS 13 (Jan/Feb. 2006).
183. Id.
184. See Stipulated Judgment and Injunction, supra note 82.
185. - 897 N.E.2d 548 (Mass. 2008).
186. Id. at 553.
187. Id.
188. Commonwealth v. Fremont Inv. & Loan, 07-4373-BLS1,2008 Mass. Super. LEXIS 46,* * 4 5 (Mass. Sup. Ct. Feb. 25, 2008).
189. Id. at "6-7.
190. MASS. GEN. LAWS ch. 93A (2008).
191. Id. §2.
192. See Predatory Home Loan Practices Act, MASS. GEN. LAWS ch. 183C (2008). This Act defined high cost loans as a loan securing the borrower's principal dwelling and that, for a first lien mortgage, exceeds by more than eight percentage points the yield on Treasury securities with a comparable maturity, or features points and fees that are the greater of 5% of the loan or $400.
193. Id. §2.
194. The trial court found that a loan was presumptively unfair if it possessed four characteristics: 1. The loan is an ARM with an introductory period of three years or less; 2. The loan has an introductory or "teaser" rate for the initial period that is at least 3% lower than the fully indexed rate; 3. The borrower has a debt-to-income ratio that would have exceeded 50% if the lender's underwriters had measured the debt, not by the debt due under the teaser rate, but by the debt due under the fully indexed rate; and 4. The loan-to-value ratio is 100% or the loan carries a substantial prepayment penalty or a prepayment penalty that extends beyond the introductory period.
195. Commonwealth v. Fremont Inv. & Loan, 07-4373-BLS1,2008 Mass. Super. LEXIS 46, **35-36 (Mass. Sup. Ct. Feb. 25, 2008).
196. By the terms of the injunction, before commencing any foreclosure in the Commonwealth of Massachusetts Fremont must first give notice to the state Attorney General of its intent to foreclose and must inform the office whether the underlying mortgage involved in that foreclosure possesses the features that would render it "presumptively unfair." Id. at *47.
197. The Attorney General's office can object to the foreclosure on the grounds that the loan is presumptively unfair and that a foreclosure of such mortgage would be objectionable. Id. at *48. The parties men have fifteen days to work out their differences with respect to the mortgage, or Fremont can seek the court's permission to go ahead with the foreclosure despite the Attorney General's objections. Id. at *49.
198. The court then must assess "whether Fremont has taken reasonable steps to 'work out' the loan and avoid foreclosure, and whether there is any fair or reasonable alternative to foreclosure." The terms of the injunction expressly reserve the right of the court to appoint a special master if the number of disputed foreclosures "grows too large." Id.
199. Fremont, 897 N.E.2d at 558.
200. See LexisNexis 50 State Comparative Legislation and Regulations, Deceptive Trade Practices, (2008), http://www.lexisnexis.com.
201. MASS. GEN. LAWS ch. 93A, §4.
202. Id. at §11.
203. For a review of different states' unfair and deceptive acts and practices laws, see CAROLYN L. CARTER, CONSUMER PROTECTION IN THE STATES (2009), available at http://www.consumerlaw.org/issues/udap/content/UDAP-Report-Feb09. pdf.
204. These actions typically raise claims under the Fair Housing Act (FHA), and/or the Equal Credit Opportunity Act (ECOA). The FHA makes it unlawful "to discriminate against any person in making available [any real estate related transaction], or in the terms or conditions of such a transaction, because of race, color, religion, sex, handicap, familial status, or national origin." 42 U.S.C §3605(a) (2006). It is also unlawful "[t]o discriminate against any person in the terms, conditions, or privileges of sale or rental of a dwelling, or in the provision of services or facilities in connection therewith, because of race, color, religion, sex, familial status, or national origin." 42 U.S.C. §3604(b). The ECOA forbids discrimination: against any applicant, with respect to any aspect of a credit transaction- (1) on the basis of race, color, religion, national origin, sex or marital status, or age (provided the applicant has the capacity to contract); (2) because all or part of the applicant's income derives from any public assistance program; or (3) because the applicant has in good faith exercised any right under this chapter. 15 U.S.C. §1691(a) (2006).
205. See supra Part I.A.
206. See Kiff & Mills, supra note 7, at 4 n.4. For an overview of some of the reasons that certain minority groups pay more for subprime loans,
207. see Alan M. Whited Borrowing While Black: Applying Fair Lending Laws to Risk-Based Mortgage Pricing, 60 S.C. L. REV. 677 (2009).
208. Robert B. Avery et al., Higher-Priced Home Lending and the 2005 HMDA Data, FED. RES. BULL. A123, A125, A159-60 (2006), available at http://www.federalreserve.gov/pubs/bulletin/2006/hmda/bull06hmda.pdf.
209. For a history of discrimination in the home mortgage market in particular and the housing market in general, see DAN IMMERGLUCK, CREDIT TO THE COMMUNITY: COMMUNITY REINVESTMENT AND FAIR LENDING POLICY IN THE UNITED STATES 87-108 (2004);
210. see also Adam Gordon, The Creation of Homeownership: How New Deal Changes in Banking Regulation Simultaneously Made Homeownership Accessible to Whites and Out of Reach for Blacks, 115 YALE L. J. 186, 209-11 (2005) (discussing how the regulatory system denied most African-Americans the opportunity to buy homes).
211. See U.S. DEP'T OF HOUS. & URB. DEV. & U.S. DEP'T OF TREASURY, CURBING PREDATORY HOME MORTGAGE LENDING: A JOINT REPORT 17 (2000), available at www.huduser.org/publications/pdf/treasrpt.pdf [hereinafter HUD-TREASURY REPORT] (noting reasons predatory lenders can flourish in communities of color);
212. Kathleen C. Engel & Patricia A. McCoy, The CRA Implications of Predatory Lending, 29 FORDHAM URB. L.J. 1571, 1583-84 (2002) (arguing that predatory lenders flourish in markets underserved by traditional lenders);
213. see also Michael S. Barr, Credit Where It Counts: The Community Reinvestment Act and Its Critics, 80 N. Y.U. L. REV. 513, 53440 (2005) (providing overview of economic reasons for failure of the mortgage market to serve certain communities).
214. See generally ALVARO CORTES ET AL., U.S. DEP'T OF HOUS. & URB. DEV., EFFORTS TO IMPROVE HOMEOWNERSHIP OPPORTUNITIES FOR HISPANICS: CASE STUDIES OF THREE MARKET AREAS (2006), available at http://www.huduser.org/Publications/PDF/ hisp-homeown2.pdf (studying practices of Latino communities in three urban settings and finding that the lack of information about the mortgage process was the most significant barrier to homeownership and access to home mortgage financing).
215. HUD-TREASURY REPORT, supra note 106, at 48. More recent research on lending patterns found similar results and concluded that these patterns were likely the result of steering. See CALIFORNIA REINVESTMENT COALITION ET AL., PAYING MORE FOR THE AMERICAN DREAM: THE SUBPRIME SHAKEOUT AND ITS IMPACT ON LOWER-INCOME AND MINORITY COMMUNITIES 4-5 (2008), available at http://www.woodstockinst.org/publications/download/paying-more-for-the-american- dream-% 11 -the-subprime-shakeout-and-its-impact-on-lower% 11 income-and-minority-communities
216. (analyzing activity of subprime lenders in seven metropolitan areas and finding that over 40% of the loans by these entities were in predominantly minority neighborhoods while only 10% of their loans were in predominantly white neighborhoods, "suggesting] that these neighborhoods were targeted by high-risk lenders"). A preliminary investigation showed that at least some subprime borrowers were otherwise qualified for prime loans, but ultimately agreed to enter into subprime loans.
217. Mike Hudson & E. Scott Reckard, More Homeowners with Good Credit Getting Stuck with Higher-Rate Loans, L.A. TIMES, Oct. 24, 2005, at Al (finding 20% of subprime borrowers would have qualified for prime loans).
218. See Robert B. Avery et al. The 2006 HMDA Data, 93 FED. RES. BULL. A73, A95 (2007), available at http://www.federalreserve.gov/pubs/bulletin/2007/pdf/ hmda06final.pdf.
219. Id.
220. Id. at A96.
221. Id.
222. Id. Other studies confirm a disproportionate share of subprime loans going to minority borrowers, even controlling for creditworthiness and other factors.
223. See, e.g., Paul S. Calem, et al. The Neighborhood Distribution of Subprime Mortgage Lending, J. REAL ESTATE FlN. & ECON. 393 (2004),;
224. Paul S. Calem et al. Neighborhood Patterns of Subprime Lending: Evidence from Disparate Cities, 15 Hous. POL'Y DEBATE 603 (2004).
225. See DEBBIE GRUENSTEIN BOCIAN ET AL., UNFAIR LENDING: THE EFFECT OF RACE AND ETHNICITY ON THE PRICE OF SUBPRIME MORTGAGES (2006), available at http://www.resporisiblelending.org/mortgage-lendmg/research-analysis/ rr011-Unfair-Lending-0506.pdf
226. W. at 10.
227. Id. at 3-4.
228. Id. at 4.
229. See Robert Avery et al. The 2007 HMDA Data, FED. RES. BULL. A107, A108-A109 (2008).
230. W. at A126 tbl. 12.
231. Prior to this recent wave of cases, and since 2000, a handful of cases have arisen in which plaintiffs raised arguments that a particular mortgage lender's practices violated either the FHA, the ECOA or both. These cases were filed before the large spike in lending that grew out of the subprime mortgage market in the mid-2000s, and will not be discussed at length here. Although the general allegation that the defendant-lenders in those cases engaged in discriminatory lending practices is similar to the allegations raised in the discretionary pricing cases discussed here, few were brought as class actions and many of the allegations raised in the complaints in those actions pre-dated the explosive growth in subprime lending that took place in communities of color earlier in this decade.
232. See, e.g., Honorable v. Easy Life Real Estate Sys, 100 F. Supp. 2d 885, 887 (ND. 111. 2000);
233. Matthews v. New Century Mortgage Corp. 185 F. Supp. 2d 874 (S.D. Ohio 2002).
234. For an overview of these earlier cases, see Raymond H. Brescia, Subprime Communities: Reverse Redlining, the Fair Housing Act and Emerging Issues in Litigation Regarding the Subprime Mortgage Crisis, 2 ALB. GOV'T L. REV. 164, 187-89 (2009).
235. The cases listed here are a representative sample. For a more comprehensive list of cases alleging the extension of credit on discriminatory terms in the subprime mortgage market, see NATIONAL CONSUMER LAW CENTER, CREDIT DISCRIMINATION 169 n.17 (5th ed. 2009)
236. - 633 F. Supp. 2d 922 (N.D. Cal. 2008).
237. The claims in Ramirez and other cases reviewed here in which plaintiffs have raised claims challenging subjective mortgage pricing echo those raised in challenges in the employment context in which subjective employment practices have a disparate and discriminatory impact. For example, in Watson v. Forth Worth Bank & Trust, 487 U.S. 977 (1988), the Court found: [Disparate impact analysis is in principle no less applicable to subjective employment criteria than to objective or standardized tests. In either case, a facially neutral practice, adopted without discriminatory intent, may have effects that are indistinguishable from intentionally discriminatory practices. Id. at 990. For an overview of Supreme Court and lower court jurisprudence regarding discretionary and subjective employment practices that have a discriminatory disparate impact,
238. see Susan Sturm, Second Generation Employment Discrimination: A Structural Approach, 101 COLUM. L. REV. 458, 486-90 (2001).
239. Ramirez, 633 F. Supp. 2d at 924-925
240. Id. at 928-29. One issue that has arisen in several of the cases discussed herein is whether disparate impact analysis is available under the FHA. Defendants have argued that the Supreme Court's decision in Smith v. City of Jackson, 544 U.S. 228 (2005),
241. construing the Age Discrimination in Employment Act (ADEA), suggests that such analysis is unavailable to the FHA plaintiff. There, the Court construed the ADEA's language regarding disparate impact as narrower than the language in Title VII which provides for claims based on proof of disparate impact of a challenged employment practice. Id. at 240. Defendants point out that no explicit provision for disparate impact analysis is found in the FHA and thus the Court's decision in Smith dictates that disparate impact analysis should not be available to the FHA plaintiff. Ramirez, 633 F. Supp. 2d at 926-27. Despite the holding in Smith with respect to the ADEA, circuit courts from across the country have continued to consider claims using disparate impact analysis under the FHA.
242. See, e.g., Budnick v. Town of Carefree, 518 F.3d 1109, 111314 (9th Cir. 2008);
243. Affordable Hous. Dev. Corp. v. City of Fresno, 433 F.3d 1182,1195 (9th Cir. 2006).
244. For a discussion of the viability of disparate impact claims under the FHA and ECOA, see Michael Aleo & Pablo Svirsky, Foreclosure Fallout: The Banking Industry's Attack on Disparate Impact Race Discrimination Claims Under the Fair Housing Act and the Equal Credit Opportunity Act, 18 B.U. PUB. INT. L.J. 1 (2008).
245. - 571 F. Supp. 2d 251 (D. Mass. 2008).
246. Id. at 253. The plaintiffs in Ramirez easily meet statistical thresholds courts have found will establish an actionable disparate impact. Courts have utilized different standards to measure statistical significance. The test applied under the Supreme Court's decision in Castaneda v. Partida found that a discrepancy of "two or three standard deviations" would constitute a statistically significant difference sufficient to establish an actionable disparate impact.
247. Castaneda v. Partida, 430 U.S. 482, 496 n.17 (1977).
248. Others utilize the "four-fifths" or "80% rule," whereby courts will find a statistically significant discrepancy where a test might disqualify members of a protected class, with similar qualifications to members of a non-protected class, at a rate greater than 20% of the time. For a description of the 80% rule, see Elaine W. Shoben, Disparate Impact Theory in Employment Discrimination: What's Griggs Still Good For? What Not?, 42 BRANDEIS L.J. 597,604 n.54 (2004).
249. Miller, 571 F. Supp. 2d at 259.
250. Taylor v. Accredited Home Lenders, Inc., 580 F. Supp. 2d 1062 (S.D. Cal. 2008).
251. Id. at 1068-1069
252. Id.
253. NAACP v. Ameriquest Mortgage Co., 635 F. Supp. 2d 1096, 1099 (CD. Cal. 2009).
254. Id.
255. Id.
256. - 455 U.S. 363 (1982).
257. - 432 U.S. 333 (1977).
258. - 550 U.S. 554 (2007).
259. See NAACP, 635 F. Supp. 2d at 1104-1105
260. Id.
261. Id.
262. - 15 U.S.C. §§ 1601-1667f (2006).
263. Id. §1601(a).
264. See id. §1635(a).
265. See 12 C.F.R. §226.15(a)(3) (2009).
266. - 545 F.3d 570 (7th Cir. 2008).
267. Id. at 575 (citing 15 U.S.C. §1640(a)(2)(B)).
268. Id. at 575-576
269. - 475 F.3d 418 (1st Cir. 2007).
270. James v. Home Constr. Co. of Mobile, 621 F.2d 727,731 (5th Cir. 1980) (citation omitted).
271. For an overview of the Baltimore litigation, see Brescia, supra note 119, at 175-179
272. See City of Cleveland v. Ameriquest Mortgage Sec., Inc., 621 F. Supp. 2d 513, 518-20 (N.D. Ohio 2009) (granting dismissal of complaint).
273. The Ohio law in question, Ohio Revised Code § 1.63, provides: The state solely shall regulate the business of originating, granting, servicing, and collecting loans and other forms of credit in the state and the manner in which any such business is conducted, and this regulation shall be in lieu of all other regulation of such activities by any municipal corporation or other political subdivision. Any ordinance, resolution, regulation, or other action by a municipal corporation or other political subdivision to regulate, directly or indirectly, the origination, granting, servicing, or collection of loans or other forms of credit constitutes a conflict with the Revised Code... is preempted. OHIO REV. CODE. ANN. § 1.63 (West 2009). Additional grounds for dismissal included that the action was barred by the economic loss rule, that the City's allegations "fail[ed] to demonstrate an unreasonable interference with a public right" and the City was unable to demonstrate "that Defendants' conduct was the proximate cause of its alleged damages." City of Cleveland, 621 F. Supp. 2d at 536. Because this action was unique among the municipal litigation currently pending, it is unclear whether this decision, if not reversed on appeal, will have any impact on the other pending actions, though it will likely discourage other municipalities within Ohio from bringing actions based on similar allegations.
274. See Jason Szep, Cities grapple with surge in abandoned homes, REUTERS, Mar. 25, 2008, available at http://www.reuters.com/article/marketsNews/ idUSNU62941020080325 (describing how Buffalo filed suit against lenders holding foreclosed properties for the costs of maintenance and/or demolition of such properties).
275. Dan Monk, City Sues Deutsche Bank, Wells Fargo, BUSINESS COURIER OF CINCINNATI, Dec. 24, 2008, available at http://www.bizjournals.con/cincinnati/ stories/2008/12/22/daily45.html (describing Cincinnati action).
276. See Brescia, supra note 119, at 168-170 and sources cited therein.
277. For an overview of municipal litigation in the wake of the subprime mortgage crisis and a preliminary assessment of the viability of claims raised in such litigation, see Creola Johnson, Fight Blight: Cities Sue to Hold Lenders Responsible for the Rise in Foreclosures and Abandoned Properties, 2008 UTAH L. REV. 1169 (2008).
278. Jennifer E. Bethel et al., Legal and Economic Issues in Litigation Arising from the 2007-2008 Credit Crisis 2-3 (Harvard Law and Economics Discussion Paper No. 612, 2008), available at http://papers.ssm.com/sol3/papers. cfm7abstract-id=1096582.
279. See. e.g.. In re 2007 Novastar Fin, Inc. Sec. Litig, No. 07-0139-CV-W-ODS, 2008 U.S. Dist. LEXIS 44166 (W.D. Mo. June 4, 2008) (granting defendant's motion to dismiss securities fraud claim where plaintiff failed to meet the heightened pleading requirements of the Private Securities Litigation Reform Act), aff d sub nom, Gilmore v. Novastar Fin, Inc. (In re 2007 Novastar Fin. Inc. Sec. Litig.), 579 F.3d 878 (8th Cir. 2009);
280. Tripp v. IndyMac Bancorp, Inc., No. CV07-1635, 2007 U.S. Dist. LEXIS 95445 (C.D. Ca. Nov. 29, 2007) (dismissing a securities fraud claim for failure to meet the heightened pleading requirements of the PSLRA where plaintiff alleged that the defendant corporation maintained it was financially stable despite the economic downturn in the housing and mortgage markets).
281. The case was originally filed in the New York Supreme Court but recently removed to federal district court under both diversity and federal question jurisdiction, and docketed under 2008 CV 11343 (S.D.N.Y) (RJH). It was subsequently remanded. Greenwich Fin. Servs. Distressed Mortgage Fund 3, LLC v. Countrywide Fin. Corp, No.08 Civ. 11343(RJH), 2009 WL 2499149 (S.D.N.Y. Aug. 14, 2009).
282. The proposed class consists of "all persons or entities that own or hold certificates in one or more" of a list of hundreds of securitization transactions listed in the complaint, likely representing hundreds of thousands of mortgages. Complaint at 12, Greenwich Fin. Servs. Distressed Mortgage Fund 3, LLC v. Countrywide Fin. Corp., 650474/2008 (N. Y. Sup. Ct. filed Dec. 01, 2008).
283. See also Vikas Bajaj, Fund Investors Sue Countrywide Over Loan Modifications, N.Y. TIMES, Dec. 2, 2008, at B8;
284. Posting of Steven M. Davidoff to DealBook, http://dealbook.blogs.nyrimes. eom/2008/12/09/behind-greenwichs-dispute-with-countrywide/ (Dec. 9, 2008, 13:56 EST).
285. Complaint, supra note 157, at ¶H 32.
286. Hensler, supra note 31, at 1596.
287. Although some of the state law claims in the municipal litigation and those cases brought by state attorneys general raise tort claims, not all claims of borrowers in the subprime context have their basis in tort. Nevertheless, discrimination claims in certain contexts have been characterized as having similar characteristics as mass torts cases generally. Geoffrey Hazard, discussing what he calls "institutional decree" litigation involving poverty and issues of discrimination, argues: [S]chool cases and other "institutional decree" litigation can be conceived as involving mass torts. Lack of equal opportunity for an effective education is certainly a personal injury in some sense of the term. So are suffering inhumane conditions in prisons and mental institutions, homelessness, inadequate medical care, and racial discrimination in public housing. These mass tort poverty-discrimination cases have arisen in virtually every large community in the United States and in many smaller ones. Their genesis has been over the same period as the asbestos claims and other mass personal injury torts. The litigation in the mass tort poverty-discrimination cases resembles the mass tort personal injury cases in yet other ways, including those discussed by Judge Weinstein: multiple party joinder of plaintiffs and respondents; use of the class suit device as the procedural structure; novel roles for counsel, court, parajudicial officers, experts, and community representatives; complex problems of causation and evidence, for example, differentiating the significance of race, class, and family structure on educational achievement and assessing the significance of "de facto" desegregation in the public schools; and problems of communication, community, participation, and individual dignity and autonomy.
288. Geoffrey C. Hazard, Jr., Reflections on Judge Weinstein 's Ethical Dilemmas in Mass Tort Litigation, 88 NW. U. L. REV. 569, 573-74 (1994).
289. Furthermore, mass financial harm cases are not recognized by some as traditional mass torts. See REPORT OF THE ADVISORY COMMITTEE, supra note 38, at 10-11. Some commentators have argued that they typically do not have the same scale of damages as more traditional mass torts cases.
290. See Oren Bar-Gill & Elizabeth Warren, Making Credit Safer, 157 U. PA. L. REV. 1, 77-78 (2008). In the subprime context, because the potential for damages in these cases reaches into the hundreds of billions, if not trillions of dollars, the scale of financial harm that could arise in the context of subprime litigation is staggering, warranting its consideration for inclusion in the pantheon of mass torts.
291. For a discussion of the commonality between mass financial harm cases and mass torts generally, see DEBORAH HENSLER, ET AL., supra note 43, at 51-452 (2000).
292. See supra Part IIB. 1.
293. See infra Part III.B.
294. See supra notes 83-84 and accompanying text.
295. See supra Part II.B.2.
296. Commonality issues arise in several potential, not necessarily mutually exclusive settings: e.g., in federal courts through joinder of plaintiffs (through FRCP 20); class action treatment (through FRCP 23); consolidation (through FRCP 42); and multi-district litigation (through 28 U.S.C. §1407). Procedural rules of the state courts have similar mechanisms.
297. See, e.g., Stephen B. Burbank, The Class Action Fairness Act of 2005 in Historical Context: A Preliminary View, 156 U. PA. L. REV. 1439, 1544 tbl. 1 (list of states that have adopted provision similar to FRCP 23 after its amendment in 1966) (2008). For a survey of state multi-district procedures,
298. see Yvette Ostolaza & Michelle Hartmann, Overview of Multidistrict Litigation Rules at the State and Federal Level, 26 REV. LmG. 47, 69-75 (2007). For a fuller discussion of commonality issues in mass torts litigation,
299. see Hensler & Peterson, supra note 42, at 967-69.
300. In addition, claim aggregation in mass torts litigation is common. Georgene M Vairo, Georgine, the Dalkon Sheild Claimants Trust, and the Rhetoric of Mass Torts Claims Resolution, 31 LOY. L. A. L. REV. 79, 95 (1997) (describing multi-district treatment of tens of thousands of asbestos cases as a "dramatic example" of aggregation).
301. Deborah R. Hensler, A Glass Half Full, A Glass Half Empty: The Use of Alternative Dispute Resolution in Mass Personal Injury Litigation, 73 TEX. L. REV. 1587, 1609-12 (1995) [hereinafter Hensler, A Glass Half Full] (providing examples of aggregated mass tort suits).
302. As an example, several different types of claimants- based on the current status of their loan and whether they have already been foreclosed upon- are contemplated to benefit from the Bank of America/Countrywide settlement. See supra note 82.
303. See, e.g.. Complaint, City of Buffalo v. ABN AMRO Mortgage Group Inc, at 92-93 (seeking damages for costs to municipality for maintenance of foreclosed properties).
304. The Countrywide/Bank of America settlement sets aside funds to assist borrowers who had already been foreclosed upon by the time the settlement was reached but does not set forth any mechanism for determining what type of compensation such borrowers should receive. See supra note 82, at 19-20.
305. For a description of settlement grids, see NAGAREDA, supra note 31, at 60-65.
306. Many free websites make "mortgage calculators" readily available to consumers. See, e.g., www.mortgage-calc.com. Over the life of a loan, the total cost to the borrower for a loan of $250,000 loan at an 8% interest rate as opposed to one of 6% is roughly $120,000 higher, i.e., nearly 50% the original loan amount.
307. See supra note 153 and accompanying text.
308. See supra Part II.B.4.
309. See, e.g., Michael S. Barr et al., Behaviorally Informed Home Mortgage Regulation, in BORROWING TO LIVE: CONSUMER AND MORTGAGE CREDIT REVISITED 170, (Nicolas P. Retsinas & Eric S. Belsky eds, 2008) (arguing for a default option of "plain vanilla" mortgages to ensure borrowers are steered towards simple, fixed-term loans where appropriate).
310. See Howard Husock, Housing Goals We Can't Afford, N.Y. TIMES, Dec. 11, 2008, at A49.
311. See Jo Becker et al. White House Philosophy Stoked Mortgage Bonfire, N.Y. TIMES, Dec. 21, 2008, at A1. Of course, financial deregulation did not occur only under Republican presidents. The Gramm-Leach-Bliley Act, Pub. L. No.106-102, 113 Stat. 1338 (1999) (codified in scattered sections of 12 and 15 U.S.C), which took down the wall between commercial and investment banks, and the Commodity Futures Modernization Act of 2000, 7 U.S.C. §§l-27f (2006), were both passed and signed into law during the Clinton Administration.
312. See WILLIAM A. FLECKENSTEIN WITH FREDERICK SHEEHAN, GREENSPAN'S BUBBLES: THE AGE OF IGNORANCE AT THE FEDERAL RESERVE (2008).
313. See infra Part III.B.2.
314. See supra Part II.B.4.
315. Timothy D. Lytton, Using Tort Litigation to Enhance Regulatory Policy Making: Evaluating Climate-Change Litigation in Light of Lessons from Gun-Industry and Clergy-Sexual-Abuse Lawsuits, 86 TEX. L. REV. 1837, 1838 (2008).
316. Id. at 1862.
317. Id. at 1858-1859.
318. Id. at 1859-1861.
319. Id. at 1863.
320. Id.
321. Id. at 1864. Lytton asserts that lawyers become more experienced with the litigation and skilled in uncovering the facts necessary to establish their claims. Moreover, judges became more skeptical of church opposition to discovery. "Litigation thus produced more clients, better lawyering skills with which to pursue their claims, a growing supply of attorneys to bring the claims, and increasing sympathy among judges." Id.
322. Id.
323. Id. at 1865.
324. Id.
325. A critical issue is the ability of homeowners to defend themselves against a foreclosure action brought by the mortgagee. When the mortgagee is also a defendant in the homeowner's affirmative case, there is a risk that the desire of individual homeowners to avoid foreclosure when they are also parties to large, sprawling affirmative cases will receive less attention than the pursuit of their affirmative claims, leaving them exposed to the loss of their home while they await the outcome of their affirmative case.
326. See NATIONAL ASSOCIATION OF CONSUMER ADVOCATES, CLASS ACTION GUIDELINES 11-17 (rev. 2006) (outlining guidelines for attorneys when handling class action cases involving the mortgages of homeowners to guard against foreclosure during the pendency of an affirmative case), available at http://www.naca.net/-assets/ media/revisedguidelines.pdf.
327. Id. at 1863.
328. See id. at 1864.
329. See Video: Rick Santelli and the "Rant of the Year," http://www.youtube.com/watch?v=bEZB4taSEoA (showing 1,062,034 views as of last visit on Jun. 9, 2009).
330. In the mass torts context, discovery has been critical in uncovering information central to plaintiffs' claims. In the asbestos litigation, discovery revealed a conspiracy to hide information about product risk. David Rosenberg, The Dusting of America: A Story of Asbestos-Carnage, Cover-up, and Litigation, 99 HARV. L. REV. 1693, 1696-701 (1986)
331. (reviewing PAUL BRODEUR, OUTRAGEOUS MISCONDUCT: THE ASBESTOS INDUSTRY ON TRIAL (1985)).
332. For a discussion of the impact of discovery on cigarette litigation, see Brian H. Barr, Engle v. RJ. Reynolds: The Improper Assessment of Punitive Damages for an Entire Class of Injured Smokers, 28 FLA. ST. U. L. REV. 787, 798-99 (2001).
333. For a discussion of the role of discovery in uncovering information that showed church officials were aware of abusive conduct yet took efforts to conceal it, see Lytton, supra note 180, at 1852-53. See also Michael D. Green, Negligence = Economic Efficiency: Doubts, 75 TEX. L. REV. 1605, 1640-41 (1997)
334. (describing documents obtained through discovery in the Ford Pinto litigation that showed Ford was aware of product design defects and could have corrected them relatively inexpensively); Weinstein, supra note 52, at 512 (describing types of "smoking gun" evidence that can be obtained through discovery in mass torts cases).
335. Timothy D. Lytton, Using Tort Litigation to Enhance Regulatory Policy Making: Evaluating Climate-Change Litigation in Light of Lessons from Gun-Industry and ClergySexual-Abuse Lawsuits, 86 TEX. L. REV. 1837, 1845 (2008)
336. ("Litigation has also generated information relevant to regulating firearm design and gun-industry marketing practices. Discovery has uncovered that gun manufacturers are further along in developing safer gun designs than their public statements suggest.") (citations omitted). See also Wendy Wagner, Stubborn Information Problems & the Regulatory Benefits of Gun Litigation, in SUING THE GUN INDUSTRY: A BATTLE AT THE CROSSROADS OF GUN CONTROL AND MASS TORTS 271 (Timothy D. Lytton ed, 2005).
337. A recent New York Times editorial said it succinctly, when commenting on a release of documents in the Catholic church's clergy abuse scandal: In the end it was not the power of repentance or compassion that compelled the Roman Catholic Diocese of Bridgeport, Conn., to release more than 12,000 pages of documents relating to lawsuits alleging decades of sexual abuse of children by its priests. It was a court order.
338. A Bishop's Words, N.Y. TIMES, Dec. 7, 2009, at A28, available at http://www.nytimes.com/2009/12/07/opinion/07mon2.html.
339. Mayor of Baltimore v. Wells Fargo Bank NA, 631 F. Supp. 2d 701, 704 (D. Md 2009).
340. See Michael Powell, Bank Accused of Pushing Mortgage Deals on Blacks, N.Y. TIMES, June 7, 2009, at A16, available at http://www.nytimes.com/2009/06/ 07/us/07baltimore.htrd?scp=l&sq=affidavits%20baltimore&st=cse.
341. In a stunning turnaround, just six months after denial of the initial motion to dismiss, and after the case was transferred to a new trial judge, a new bank motion to dismiss was granted. In its decision on that motion, the new trial judge concluded that the plaintiffs had failed to show in their amended complaint that their allegations regarding their standing to sue were plausible, citing the Supreme Court's decision in Ashcroft v. Iqbal, 129 S. Ct 1937 (2009).
342. Mayor and City Council of Baltimore v. Wells Fargo, CV 08-0062, Slip Copy, 2010 WL 92545 (D.Md., 2010) (January 06, 2010). In the decision, the plaintiffs were invited to amend their complaint if they can satisfy the pleading requirements imposed by the trial judge. Id. at *4.
343. See infra Part IV.D.
344. See infra Part IV.D.
345. According to recently released public information concerning the progress of the settlement, as of the third quarter of calendar year 2009, there have been a total of 95, 991 loan modifications under the settlement nationwide. See non-confidential section of Third Quarter 2009 Progress Report (on file with author).
346. As of September 1, 2009, according to the Congressional Oversight Panel, the Home Affordable Modification Program (HAMP) "had facilitated 1, 711 permanent mortgage modifications, with another 362, 348 additional borrowers in a three-month trial stage. [The Home Affordable Refinance Program] had closed 95, 729 refinancings . . . ."
347. CONGRESSIONAL OVERSIGHT PANEL, OCTOBER OVERSIGHT REPORT: AN ASSESSMENT OF FORECLOSURE MITIGATION EFFORTS AFTER SIX MONTHS 3 (Oct. 9, 2009), available at http://financialservices.house.gov/Key-Issues/TARP-Oversight-and-Accountability- Reports/COP-Foreclosure-Mitigation-Rptl00909.pdf.
348. This number has improved since September. Figures from the Treasury Department indicate that through November 2009, 31,382 permanent modifications have been secured through HAMP for all banks participating in the program.
349. U.S. DEP'T OF THE TREASURY, MAKING HOMES AFFORDABLE PROGRAM: SERVICER PERFORMANCE REPORT THROUGH NOVEMBER 2009, 3 (2009), available at http://www.financialstability.gov/docs/MHA%20Public%20I21009%20Final.pdf. This number, though an improvement, is still less than one-third the number of loan modifications secured with just one bank through the Countrywide/Bank of America settlement.
350. The technique of multi-district litigation often deployed in mass torts litigation has already been utilized in the mortgage setting. For example, the Miller action referenced above has been
351. Similarly, mortgage discrimination claims against Wells Fargo have been consolidated through MDL as well. In re Wells Fargo Residential Mortg. Lending Discrimination Litig, 2009 WL 2473684 (N.D. Cal. 2009) (Order Denying Defendant's Motion to Join Mortgage Brokers as Necessary Parties). While many subprime lawsuits are class actions, aggregation of claims without resort to Rule 23 is also entirely possible assuming the "common issues of law or fact" appear in the cases sought to be consolidated and aggregated. See Chamblee, supra note 33, at 187-190 (describing non-class aggregation methods). Such approaches would permit parties to avoid the apparent bar on rescission as a remedy under TILA, and would prevent the preclusive effects of class action judgments on absent class members in mandatory class actions. consolidated with several other nationwide class actions brought against Countrywide for treatment as multi-district litigation under 28 U.S.C. § 1407. In re Countrywide Fin. Corp. Mortg. Lending Practices Litig, 571 F. Supp. 2d 1366 (J.P.M.L. 2008). Similarly, mortgage discrimination claims against Wells Fargo have been consolidated through MDL as well. In re Wells Fargo Residential Mortg. Lending Discrimination Litig, 2009 WL 2473684 (N.D. Cal. 2009) (Order Denying Defendant's Motion to Join Mortgage Brokers as Necessary Parties). While many subprime lawsuits are class actions, aggregation of claims without resort to Rule 23 is also entirely possible assuming the "common issues of law or fact" appear in the cases sought to be consolidated and aggregated. See Chamblee, supra note 33, at 187-190 (describing non-class aggregation methods). Such approaches would permit parties to avoid the apparent bar on rescission as a remedy under TILA, and would prevent the preclusive effects of class action judgments on absent class members in mandatory class actions.
352. In these ways, subprime litigation can "enhance[] the performance of other regulatory institutions" because it can "[u]ncover[] information, fram[e] issues, attract[] attention to them, shap[e] policy alternatives, and exertQ pressure on policymakers." Timothy D. Lytton, Clergy Sexual Abuse Litigation: The Policymaking Role of Tort Law, 39 CONN. L. REV. 809, 880 (2007).
353. For a discussion of the role of courts in the face of regulatory or legislative inaction, see, e.g., NEIL K. KOMESAR, IMPERFECT ALTERNATIVES: CHOOSING INSTITUTIONS IN LAW, ECONOMICS, AND PUBLIC POLICY 150 (1994); PETER H. SCHUCK, THE LIMITS OF LAW 350-63 (2000).
354. See supra notes 86-99 and accompanying text.
355. See COP MARCH 2009 REPORT, supra note 22, at 42-47 (outlining barriers to loan modifications).
356. See Hunt, supra note 22.
357. Anna Gelpern & Adam J. Levitin, Rewriting Frankenstein Contracts: Workout Prohibitions in Residential Mortgage-Backed Securities (Georgetown University Law Center, Business, Economic & Regulatory Policy Working Papers Series, Research Paper No. 1323546, 2009), available at http://ssrn.com/ abstract= 1323546.
358. See generally Mark Pettit, Jr, Freedom, Freedom of Contract, and "The Rise and Fall", 79 B.U. L. REV. 263 (1999) (analysis of the loss of freedom and freedom to contract since the "Golden Age" of the late nineteenth century through analysis of several cases from the same era where contracts were voided as being against public policies).
359. Id. at 299-300.
360. See RESTATEMENT (FIRST) OF CONTRACTS ch. 18 (1932).
361. Chapter 18, entitled "Illegal Bargains," covers many, but not all, types of contracts that are unenforceable including those which are bargains in restraint of trade, contracts involving wagering, usury contracts, bargains to be performed on Sunday, bargains tending to obstruct the administration of justice, in violation of a public or private fiduciary duty, tending to defraud or injure third parties or prohibited by statute as well as some concerning familial relations.
362. - 87 U.S. 459 (1874).
363. Id. at 463.
364. See Pettit, supra note 206, at 296.
365. Harry G. Prince, Public Policy Limitations on Cohabitation Agreements: Unruly Horse or Circus Pony?, 70 MINN. L. REV. 163, 171 (1985).
366. On May 20, 2009 Congress enacted the Helping Families Save Their Homes Act of 2009, Pub. L. No.111-22, 123 Stat. 1632. The relevant portions of Section 201, which is entitled "Servicer safe harbor for mortgage loan modifications" are: (a) IN GENERAL.-Notwithstanding any other provision of law, whenever a servicer of residential mortgages agrees to enter into a qualified loss mitigation plan with respect to 1 or more residential mortgages originated before the date of enactment of the Helping Families Save Their Homes Act of 2009, including mortgages held in a securitization or other investment vehicle- (1) to the extent that the servicer owes a duty to investors or other parties to maximize the net present value of such mortgages, the duty shall be construed to apply to all such investors and parties, and not to any individual party or group of parties; and (2) the servicer shall be deemed to have satisfied the duty set forth in paragraph (1) if, before December 31, 2012, the servicer implements a qualified loss mitigation plan that meets the following criteria: (A) Default on the payment of such mortgage has occurred, is imminent, or is reasonably foreseeable, as such terms are defined by guidelines issued by the Secretary of the Treasury or his designee under the Emergency Economic Stabilization Act of 2008. (B) The mortgagor occupies the property securing the mortgage as his or her principal residence. (C) The servicer reasonably determined, consistent with the guidelines issued by the Secretary of the Treasury or his designee, that the application of such qualified loss mitigation plan to a mortgage or class of mortgages will likely provide an anticipated recovery on the outstanding principal mortgage debt that will exceed the anticipated recovery through foreclosures. (b) NO LIABILITY.-A servicer that is deemed to be acting in the best interests of all investors or other parties under this section shall not be liable to any party who is owed a duty under subsection (a)(1), and shall not be subject to any injunction, stay, or other equitable relief to such party, based solely upon the implementation by the servicer of a qualified loss mitigation plan. (c) STANDARD INDUSTRY PRACTICE.-The qualified loss mitigation plan guidelines issued by the Secretary
367. (a). Id. § 201; see also U.S. DEP'T OF TREASURY, HOME AFFORDABLE MODIFICATION PROGRAM GUIDELINES (2009), available at http://www.treas.gov/press/ releases/reports/ modification-program-guidelines.pdf.
368. See, e.g., Vern Countryman, The Holder in Due Course and Other Anachronisms in Consumer Credit, 52 TEX. L. REV. 1, 2-3 (1973)
369. (describing holder in due course doctrine); see also Kathleen C. Engel & Patricia A. McCoy, Predatory Lending: What Does Wall Street Have to Do With It?, 15 HOUSING POL'Y DEBATE 715, 724-26 (2004) (describing application of holder in due course doctrine in subprime securitization process), available at http://www.mi.vt.edu/data/files/hpd%2015%283%29/hpd%2015%283%29-article-engel. pdf;
370. Cassandra Jones Havard, To Lend or Not to Lend: What the CRA Ought to Say About Sub-Prime and Predatory Lending, 7 FLA. COASTAL L. REV. 1,16-18 (2005) (same).
371. See, e.g., Christopher L. Peterson, Predatory Structured Finance, 28 CARDOZO L. REV. 2185, 2235-2238 (2007) (describing exceptions to holder in due course doctrine and successful attempts at enforcing such exceptions).
372. See Kathleen C. Engel & Patricia A. McCoy, Turning a Blind Eye: Wall Street Finance of Predatory Lending, 75 FORDHAM L. REV. 2039, 2052-2054 (2007) (describing TILA and HOEPA exemptions).
373. See, e.g., Kurt Eggert, Held Up in Due Course: Predatory Lending, Securitization, and the Holder in Due Course Doctrine, 35 CREIGHTON L. REV. 503, 640 (2002)
374. (arguing that the holder in due course is not necessary in residential mortgage loans); Siddhartha Venkatesan, Note, Abrogating the Holder in Due Course Doctrine in Subprime Mortgage Transactions to More Effectively Police Predatory Lending, 7 N.Y.U. J. LEGIS. & PUB. POL'Y 177 (2003) (advocating an affirmative cause of action against predatory loan assignees).
375. See Household Fin. Corp. v. Artis (In re Artis), 27 B.R. 863, 866 (Bankr. E.D.N.Y. 1983) ("The right of recission whether based on statutory authority or common law is governed by equitable principles.");
376. Lee v. Thermal Eng'g Corp., 572 S.E.2d 298, 301 (S.C. Q. App. 2002)
377. ("[B]y the rules of the common law it is competent for the parties to a simple contract in writing before any breach of its provisions, either altogether to waive, dissolve, or abandon it, or vary or qualify its terms, and thus make a new one.") (quoting Evatt v. Campbell, 106 S.E.2d 447, 450 (S.C. 1959)).
378. Compare RESTATEMENT (SECOND) OF CONTRACTS §§ 162, 164 (1981)
379. ( stating that fraudulent or material misrepresentation renders a contract voidable), and RESTATEMENT (FIRST) OF RESTITUTION § 55 cmt. a (1937)
380. (claiming an extremely broad application of restitution for benefits received through misrepresentation or fraud), and RESTATEMENT (THIRD) OF RESTITUTION & UNJUST ENRICHMENT § 54 & cmt. b (Tentative Draft No. 6, 2008)
381. (noting that rescission is left to the discretion of the court and is governed by equitable principles), with NAT'L CONSUMER LAW CTR, TRUTH IN LENDING § 6.7.3.1, at 459 & n.831 (6th ed. 2007)
382. (explaining the primary difference as being that under TILA the creditor who violated the law must act first), and Robert Murken, Can't Get No Satisfaction? Revising How Courts Rescind Home Equity Loans Under The Truth In Lending Act, 77 TEMP L. REV. 457, 463 (2004) (providing a brief overview of how §1635(b) of TILA modifies rescission under common law).
383. Mor-Wood Contractors, Inc. v. Ottinger, 562 N.E.2d 1247, 1253 (III. App. Q. 1990) ("[Rescission is also an equitable remedy which can be afforded to one party under a contract because of the other party's fraud.")
384. (citing Douglass v. Wones, 458 N.E.2d 514, 523 (III. App. Ct. 1983));
385. Scott v. Commercial Servs. of Perry, Inc., 121 S.W.3d 26, 30 (Tex. App. 2003) ("[Rescission of a contract is available as an alternative to damages in cases in which one contracting party is induced to contract by the fraud of the other.").
386. Mich. Prot. & Advocacy Serv., Inc. v. Babin, 18 F.3d 337, 344 (6th Cir. 1994) (asserting the congressional intent for the statute as having a broad reach);
387. Matthews v. New Century Mortgage Corp, 185 F. Supp. 2d 874, 885 (S.D. Ohio 2002) (stating that § 3604 of FHA should "be read liberally, so that its terms reach transactions that fall beyond the literal scope of selling or renting housing").
388. Fair Housing Amendments Act of 1988, 42 U.S.C. § 3613(c)(1) (2006) ("[M]ay grant as relief, as the court deems appropriate, any. other order. or ordering such affirmative action as may be appropriate.");
389. Equal Credit Opportunity Act, 15 U.S.C. § 1691e(c) (2006) ("[Courts] may grant such equitable and declaratory relief as is necessary to enforce the requirements imposed under this subchapter.").
390. Hills v. Gautreaux, 425 U.S. 284, 297 (1976) ("[E]very effort should be made by a. court to employ [reasonable] methods 'to achieve the greatest possible degree of (relief), taking into account the practicalities of the situation.'")
391. (quoting Davis v. Sch. Comm'rs of Mobile County, 402 U.S. 33, 37 (1971));
392. Swann v. Charlotte-Mecklenburg Bd. of Educ, 402 U.S. 1, 15 (1971) ("[T]he scope of a. court's equitable powers to remedy past wrongs is broad, for breadth and flexibility are inherent in equitable remedies.").
393. See generally Truth In Lending Act, 15 U.S.C. § 1635(b) (2006) (describing how rescission relieves the borrower of debt while also requiring the return of any property or money gained);
394. NAT'L CONSUMER LAW CTR, supra note 218, § 6.6.3.2, at 445-46 (describing the borrower's rescission benefits in more detail);
395. id. § 6.6.4.2, at 447-448 (describing the borrower's rescission obligations in more detail).
396. NAT'L CONSUMER LAW CTR., supra note 218, §6.1, at 384 (discussing the reluctance of low-income borrowers to seek rescission due to a concern about tender costs).
397. See supra Part H.B.I.
398. See supra note 85 and accompanying text.
399. See supra notes 94-95 and accompany text.
400. See supra notes 55-59 and accompanying text.
401. Andrews v. Chevy Chase Bank, 545 F.3d 570, 575 (7th Cir. 2008) ("TILA's rescission remedy- by its terms an individualized, restorative rather than compensatory remedy- is just that, a purely individual remedy that may not be pursued on behalf of a class." (emphasis omitted));
402. McKenna v. First Horizon Home Loan Corp, 475 F.3d 418, 423 (1st Cir. 2007);
403. James v. Home Constr. Co. of Mobile, Inc., 621 F.2d 727, 730-731 (5th Cir. 1980).
404. The relevant portion of the Fair Housing Act, 42 U.S.C. § 3613 provides: (c) Relief which may be granted (1) In a civil action under subsection (a) of this section, if the court finds that a discriminatory housing practice has occurred or is about to occur, the court may award to the plaintiff actual and punitive damages, and subject to subsection (d) of this section, may grant as relief, as the court deems appropriate, any permanent or temporary injunction, temporary restraining order, or other order (including an order enjoining the defendant from engaging in such practice or ordering such affirmative action as may be appropriate). (2) In a civil action under subsection (a) of this section, the court, in its discretion, may allow the prevailing party, other than the United States, a reasonable attorney's fee and costs. The United States shall be liable for such fees and costs to the same extent as a private person. (d) Effect on certain sales, encumbrances, and rentals Relief granted under this section shall not affect any contract, sale, encumbrance, or lease consummated before the granting of such relief and involving a bona fide purchaser, encumbrancer, or tenant, without actual notice of the filing of a complaint with the Secretary or civil action under this subchapter. 42 U.S.C. § 3613(c)-(d) (2006). The relevant portion of ECOA provides that "upon application by an aggrieved applicant, the appropriate United States District Court or any other court of competent jurisdiction may grant such equitable and declaratory relief as is necessary to enforce the requirements imposed under this subchapter." 15 U.S.C. § 1691e(c) (2006).
405. See Williams v. Empire Funding Corp, 183 F.R.D. 428, 435-436 (E.D. Pa. 1998) (asserting that TILA does not preclude the individual remedy of rescission to each class member under the mechanism of a class action).
406. See supra Part IIB. 1 (common law claims) & II.B.4 (municipal litigation).
407. See Gladstone Realtors v. Village of Bellwood, 441 U.S. 91 (1979) (recognizing municipality standing where racial steering in housing allegedly reduced property values and diminished the local tax base);
408. Village of Bellwood v. Dwivedi, 895 F.2d 1521, 1525 (7th Cir. 1990) (recognizing municipality standing in a case of racial steering in light of "settled" nature of the issue as a result of Court's ruling in Gladstone);
409. Heights Cmty. Congress v. Hilltop Realty, Inc., 774 F.2d 135, 138-39 (6th Cir. 1985) (citing Gladstone and recognizing municipality standing in case alleging racial steering in housing that resulted in diminution in the tax base from such practice).
410. For a contrary argument, see Jonathan L. Entin & Shadya Y. Yazback, City Governments and Predatory Lending, 34 FORDHAM URB. L.J. 757, 762-70 (2007) (arguing against municipality standing to pursue claims the lenders engaged in predatory lending against local residents).
411. - 549 U.S. 497 (2007).
412. Under CAA, the EPA has authority to issue regulations concerning control of "air pollutants." Id. at 506. The EPA had chosen not to issue rules with respect to these gases, and had failed to provide reasons for that decision, in the face of Massachusetts's express request that the EPA generate such rules. See id. at 510, 533-34. In seeking compliance with the CAA's terms, Massachusetts was seeking that the EPA make a determination that greenhouse gas emissions were, in fact, pollutants, and, assuming that the EPA found that they were, issue regulations pertaining to their emissions. See id. at 510.
413. Id. at 514-516 (citing 42 U.S.C. § 7607 (b) (1) (2006)).
414. - 504 U.S. 555 (1992).
415. Massachusetts, 549 U.S. at 522.
416. Id. at 523.
417. Id. at 524.
418. Id. at 526.
419. For an assessment of the likely impact of the Court's discussion of standing in Massachusetts v. EPA, see generally Jonathan H. Adler, God. Gaia. The Taxpayer, and the Lorax: Standing, Justiciability, and Separation of Powers after Massachusetts and Hein, 20 REGENT U. L. REV. 175 (2008);
420. Robert V. Percival, Massachusetts v. EPA: Escaping the Common Law's Growing Shadow, 2007 SUP. CT. REV. 111 (2007);
421. Tyler Welti, Massachusetts v. EPA's Regulatory Interest Theory: A Victory for the Climate. Not Public Law Plaintiffs, 94 VA. L. REV. 1751 (2008).
422. See supra note 52.
423. See supra notes 50-52 and accompanying text.
424. Of course, the futures problem is only a problem in the class action context where members of the class will be prevented from re-litigating claims disposed of in the class action itself. Aggregation or consolidation short of class action treatment will not bar absent parties. See, e.g., Elinor P. Schroeder, Relitigation of Common Issues: The Failure of Nonparty Preclusion and an Alternative Proposal, 67 IOWA L. REV. 917, 919-921 (1982) (describing requirement of privity when seeking to apply preclusive effects of prior judgments).
425. IEHI, Inc., The Mortgage Lender Implode-O-Meter, http://ml-implode.eom/ index.html#lists (last visited July 1, 2009).
426. See Alan N. Resnick, Bankruptcy as a Vehicle for Resolving Enterprise-Threatening Mass Tort Liability, 148 U. PA. L. REV. 2045 (2000) (arguing that bankruptcy system is efficient and effective forum for the resolution of mass torts claims);
427. Douglas G. Smith, Resolution of Mass Tort Claims in the Bankruptcy System, 41 U.C. DAVIS L. REV. 1613 (2008) (same).
428. See supra notes 60-70 and accompanying text.
429. See supra notes 53-54 and accompanying text.
430. - 42 U.S.C. §§ 9601-9657 (2006).
431. For an overview of CERCLA's Superfund program, see JOHN A. HIRD, SUPERFUND: THE POLITICAL ECONOMY OF ENVIRONMENTAL RISK (1994);
432. Kathleen Chandler Schmid, Note, The Depletion of the Superfund and Natural Resources Damages, 16 N.Y.U. ENV. L. J. 483 (2008).
433. For an overview of the 9/11 Victims Compensation Fund, see Mike Steenson & Joseph Michael Sayler, The Legacy of the 9/11 Fund and the Minnesota I-35W Bridge-Collapse Fund: Creating a Template for Compensating Victims of Future Mass-Tort Catastrophes, 35 WM. MITCHELL L. REV. 524, 530-60 (2009)
434. th Litigation, 81 S. CAL. L. REV. 199 (2008) (providing an overview of the 9/11 Victims Compensation Fund and the litigation that arose around it).
435. The Department of Treasury announced on March 4, 2009 its guidelines for participation in the Home Affordable Modification Program (HAMP) which was implemented through the authority granted to the Secretary of the Treasury by the Troubled Assets Relief Program (TARP), which was in turn authorized by the Emergency Economic Stabilization Act of 2008, 12 U.S.C. § 5201-5261 (Supp. II 2008). See also U.S. DEP'T OF TREASURY, supra note 213 (HAMP Guidelines). The program is designed to set forth a standardized process for servicers to modify mortgages in foreclosure or in imminent danger of entering foreclosure with limited help available to those current on their mortgages. If the Net Present Value (NPV) of the expected cash flows from modified mortgage is greater than the NPV of the cash flows without modification, the borrower must be offered a Home Affordable Modification. The program provides incentives to both servicers and borrowers, in the form of cash payments to the servicers and principal reduction for the borrowers, for keeping current on the modified mortgage terms. The program also requires stringent verification of all information required of borrowers as well as reporting guidelines for those servicers participating in HAMP. Borrowers must meet rigid qualifications to participate in the program. Owners with mortgages on single family one- to four-unit, owner-occupied properties that are primary residences, as verified by tax returns and credit reports, with additional documentation such as utility bills, meet the eligibility requirement. The home may not be condemned, abandoned, or investor owned but those borrowers that are in bankruptcy are not per se ineligible for a loan modification. Those borrowers currently involved in litigation relating to the mortgage do not relinquish legal rights by participating in HAMP. There is also a maximum amount of principal which may be owed on the loan, which escalates as the number of units rises, to qualify.
436. - 527 U.S. 819 (1999).
437. Id. at 846.
438. Id. at 852-853
439. . Generally, an estimated 80% of the legal needs of the indigent are not met, while 40-60% of the legal needs of the middle class are unmet. See. e.g.. LEGAL SERV. CORP, SERVING THE CIVIL LEGAL NEEDS OF LOW-INCOME AMERICANS (2000), available at http://permanent.access.gpo.gov/lpsl2495/www.lsc.gov/foia/other/ exsum.pdf (describing unmet legal needs of the poor);
440. ALBERT H. CANTRIL, AMERICAN BAR ASSOCIATION, AGENDA FOR ACCESS: THE AMERICAN PEOPLE AND CIVIL JUSTICE (1996) (describing legal needs of moderate-income Americans);
441. ROY W. REESE & CAROLYN A. ALDRED, LEGAL NEEDS AMONG LOW-INCOME AND MODERATE-INCOME HOUSEHOLDS: SUMMARY OF FINDINGS FOR THE COMPREHENSIVE LEGAL NEEDS STUDY 32 (1994).
442. These studies likely underestimate the actual percentage of the legal needs of low- and moderate-income individuals that go unmet because such individuals often are not even aware that they have legal problems. Deborah Rhode, Access to Justice: Connecting Principles to Practice, 17 GEO. J. LEGAL ETHICS 369, 397-98 (2004);
443. Deborah L. Rhode, Access to Justice, 69 FORDHAM L. REV. 1785, 1818 (2001 ).
444. Not all states require mortgage foreclosure through judicial process: Judicial foreclosure-a termination of the mortgagor's interest in the property that in effect allows the mortgagee to seize and/or sell the property- is the "predominant," though often not the exclusive, method of foreclosure in the United States. About 60 percent of states permit a "power of sale" foreclosure, through which a mortgagor grants to the mortgagee the right to terminate the interests of the mortgagor and foreclose on the mortgage through sale of the deed, typically by a sheriff or other public official. Even where power of sale foreclosures are permitted, there are certain situations where a mortgagee will elect to utilize the state's judicial foreclosure apparatus, for example, where there are lien priority disputes. There are also times where the judicial foreclosure process is mandatory, as is the case in those jurisdictions that require judicial intervention when a mortgagee seeks a deficiency judgment in addition to the foreclosure judgment, or where the mortgage documents do not permit a power of sale foreclosure.
445. Brescia, supra note 72, at 338 (footnotes omitted).
446. The absence of representation of borrowers in foreclosure proceedings is notable. See MELANCA CLARK WITH MAGGIE BARON, FORECLOSURES: A CRISIS IN LEGAL REPRESENTATION 2 (2009) (showing that 84% of borrowers in foreclosure proceedings in Queens County, NY went without representation; on Staten Island, NY, the figure reached 91%; in Nassau County it was 92%).
447. The majority opinions in Amchem Products v. Windsor and Ortiz v. Fibreboard Corp. have met strong criticism for their nostalgic view of individualized adjudication. See, e.g., Hensler, supra note 62, at 1923-1924 (arguing majority opinions in Amchem and Ortiz actually puts interests of future claimants at risk);
448. Samuel Issacharoff, "Shocked": Mass Torts and Aggregate Asbestos Litigation After Amchem and Ortiz, 80 TEX. L. REV. 1925, 1930 (2002) (describing reality of asbestos litigation after Amchem and Ortiz as one in which "the economics of litigation and the sophistication of the bar in this area have combined to leave far behind such nostalgic renditions of an Aristotelian world of simple dispute resolution.");
449. Bruce Hay & David Rosenberg, "Sweetheart" and "Blackmail" Settlements in Class Actions: Reality and Remedy, 75 NOTRE DAME L. REV. 1377, 1380 n.8 (2000) (arguing majority opinion in Ortiz "establishes a conception of individualism that in operation will make all plaintiffs individually worse off").
450. Bar-Gill & Warren, supra note 161, at 70-79.
451. Id. at 74-75.
452. See id, at 75 nn.246-247 (citing Richard Craswell, Howard Beales. Alan Schwartz, Louis L. Wilde, Richard Epstein and W. Kip Viscusi).
453. Id. at 76.
454. Id. at 77.
455. For an overview of federal regulators' efforts to preempt state anti-predatory laws with respect to certain federally regulated lenders, see Raymond H. Brescia, Part of the Disease or Part of the Cure: The Financial Crisis and the Community Reinvestment Act, 59 S.C. L. REV. 617, 648-652 (2009).
456. In addition, the analysis on consumer credit regulation generally does not take into account the realities of the home mortgage context because of the resonance of homeownership in U.S. culture and the economic and social benefits derived from homeownership. On the benefits of homeownership, see Lee Ann Fennell, Homeownership 2.0, 102 Nw. UX. REV. 1047, 1058-59 (2008).
457. Of course, these benefits have their dark side. For a review of what is called America's "love affair with homeownership" and the potentially harmful consequences of the cultural and political support for homeownership, see Kristin David Adams, Homeownership: American Dream or Illusion of Empowerment, 60 S.C. L. REV. 573 (2009).
458. See, also, ALYSSA KATZ, OUR LOT: HOW REAL ESTATE CAME TO OWN US (2009) (describing political support for expanding homeownership in the U.S., from the New Deal to the present).
459. Sheryl Gay Stolberg and Edmund L. Andrews, 5275 Billion Plan Seeks to Address Crisis in Housing, N.Y. TIMES, Feb. 19, 2009, at Al, available at http://www.nytimes.com/2009/02/19/business/19housing.html?ref=todayspaper.
460. Id.
461. Renae Merle, Senate Defeats Measure to Allow Bankruptcy Judges to Change Mortgage Terms, WASH. POST, Apr. 30, 2009, available at http://www. washingtonpost.com/wp-dyn/content/article/2009/04/30/AR2009043000286.html> (discussing rejection by U.S. Senate of bankruptcy "cramdown" provision).
462. Michelle J. White & Ning Zhu, Saving Your Home in Chapter 13 Bankruptcy 20 (Nat'l Bureau of Econ. Research, Working Paper No. 14179, 2008), available at http://www.econ.ucsd.edu/-miwhite/white-zhu-nberl4179.pdf (estimating average cost to the debtor of $6,000 for filing Chapter 13 Bankruptcy, including cost of an attorney).
463. See also, Gary Klein & Shenna Kavanagh, Causes of the Subprime Foreclosure Crisis and the Availability of Class Action Responses, Northeastern L. Rev. (forthcoming 2010), draft manuscript on file with author at 55-59 (offering reasons bankruptcy "is a not feasible option" for many homeowners facing foreclosure).
464. See U.S. Courts, Filing for Bankruptcy Without an Attorney, http://www.uscourts.gov/bankruptcycourts/prose.html (last visited Feb. 24, 2009).
465. Compare Posting of Justin Harelik, to http://www.bankrate.com/finance/ debt/boosting-your-post-bankruptcy-credit-score.aspx
466. Bar-Gill & Warren, supra note 161, at 78.
467. See MORTGAGE BANKERS ASS'N, CONGRESS SHOULD AVOID FURTHER DESTABILIZATION OF THE MORTGAGE LENDING MARKET THROUGH BANKRUPTCY CRAM DOWN (2009), available at http://www.mbaa.org/files/AU/IssueBriefs/CramDownIssueBrief.pdf;
468. Editorial; Give Loan Modification a Try, WASH. POST, Jan. 11, 2009, available at 2009 WLNR 561003;
469. Jonathan Peterson, Aid On Home Loans Sought, L.A. TIMES, Feb. 26, 2008, at 1;
470. Dina ElBoghdady, Bills Offer Relief for Heavily Indebted Homeowners, WASH. POST, NOV. 20, 2007, available at 2007 WLNR 22974879.
471. See Press Release, U.S. Dep't of Treasury, Statement by Secretary Henry M. Paulson, Jr. on Announcement of New Private Sector Alliance- HOPE NOW (Oct. 10, 2007), available at http://www.ustreas.gov/press/releases/hp599.htm.
472. See HOPE NOW, FACT SHEET: 2008 HOPE NOW FORECLOSURE PREVENTION EFFORTS (2008), available at https://www.hopenow.com/press-release/files/ HOPE%20NOW%20Fact%20sheet%202008-2009.pdf.
473. Pub. L. No.110-289, 122 Stat. 2654 (2008).
474. Id. § 1402; CONGRESSIONAL BUDGET OFFICE, COST ESTIMATE: FEDERAL HOUSING FINANCE REGULATORY REFORM ACT OF 2008 8 (2008), available at http://www.cbo.gov/ftpdocs/93xx/doc9366/Senate-Housing.pdf.
475. See Vikas Bajaj, U.S. Holds the Whip Hand in Modifying Mortgages, N.Y. TIMES, Sept. 13, 2008, at C1.
476. See Stolberg & Andrews, supra note 267.
477. See supra notes 200-204 and accompanying text.
478. John C. Dugan, Comptroller of the Currency, Remarks Before the Office of Thrift Supervision's 3rd Annual National Housing Forum (Dec., 2008) (noting that 6 months after loan modification, 58% of borrowers were more than 30 days past due on their mortgage payments), available at http://www.occ.treas.gov/ftp/ release/2008-142a.pdf. Although Dugan did not have a definitive reason for the high re-default rate, he asked the following questions related to this phenomenon: The question is, why is the number of re-defaults so high? Is it because the modifications did not reduce monthly payments enough to be truly affordable to the borrowers? Is it because consumers replaced lower mortgage payments with increased credit card debt? Is it because the mortgages were so badly underwritten that the borrowers simply could not afford them, even with reduced monthly payments? Or is it a combination of these and other factors? We don't know the answers yet, but these are the types of questions that we have begun asking our servicers in detail. Id.
479. See Alan M. White, Deleveraging the American Homeowner: The Failure of 2008 Voluntary Mortgage Contract Modifications, 41 CONN. L. REV. 1107 (2009).
480. See John Fabian Witt, Toward a New History of American Accident Law: Classical Tort Law and the Cooperative Firstparty Insurance Movement, 114 HARV. L. REV. 690 (2001). On the benefits of social insurance,
481. see Theodore R. Marmor & Jerry L. Mashaw, Understanding Social Insurance: Fairness, Affordability, and the "Modernization" of Social Security and Medicare, 15 ELDER L.J. 123, 126-28 (2007). For the difference between social insurance and social welfare programs
482. , see Donald G. Gifford, The Death of Causation: Mass Products Torts' Incomplete Incorporation of Social Welfare Principles, 41 WAKE FOREST L. REV. 943, 951 n.22 (2006).
483. Kenneth S. Abraham & Lance Liebman, Private Insurance, Social Insurance, and Tort Reform: Toward a New Vision of Compensation for Illness and Injury, 93 COLUMB. L. REV. 75, 82-83 (1993).
484. See id.
485. Id. at 75.
486. th Victim Compensation Fund to argue for the need for social insurance to replace tort system). For an overview of the benefits and shortcomings of a social insurance system,
487. see Richard L. Abel, How the Plaintiffs' Bar Bars Plaintiffs, 51 N. Y. L. SCH. L. REV. 345 (2007).
488. Harris, supra note 288, at 1386.
489. See id. at 1401.
490. See Abraham & Liebman, supra note 285, at 116.
491. STEPHEN D. SUGARMAN, DOING AWAY WITH PERSONAL INJURY LAW: NEW COMPENSATION MECHANISMS FOR VICTIMS, CONSUMERS, AND BUSINESS 127-148 (1989) (arguing for replacing tort system with social insurance system and new regulatory scheme to prevent accidents).
492. See W. Kip Viscusi, Toward a Diminished Role for Tort Liability: Social Insurance, Government Regulation, and Contemporary Risks to Health and Safety, 6 YALE J. ON REG. 65 (1989).
493. Id. at 65.
494. See. e.g., id. at 65-67.
495. Linda S. Mullenix, Resolving Aggregate Mass Tort Litigation: The New Private Law Dispute Resolution Paradigm, 33 VAL. U. L. REV. 413, 428 (1999).