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Because the times in which the savings and loan industry dominated the commercial
mortgage market in this country have long past. Efforts to protect the mortgage bank
industry and expand the availability of credit in the early 1980s were replaced by tools about
the growth of fraudulent lending practices in the early 1990s regarding this period,
home mortgage lending was serious transformed. The housing mortgage market expanded
alot, and the obtaining of residential mortgage loans became common.222 Nongrants
mortgage lenders, such as quickening, became the primary originators of
residential mortgage loans, and the subprime market that made foreclosure laws, loans on less robust
underwriting standards began to flourish.130
Early subprime loans, often fixed-rate, were characterized by high interest rates and high
points and fees at origination.131 For example, in 1999 subprime mortgage loans had interest rates
as high as 19.99%, with a median interest rate between 11% and 11.99%. By contrast, for the
125 See id.; see also Waldo Kniker & Deidre Ferrel, The American Mortgage in Historical
and International Context, 19 J. OF ECON. PERSP. 93, 98 (2005). Fixed-rate mortgages paid between five
and six percent while yield on short term Treasury bills generally did not exceed four percent. See id. at 97.
The year before the Bankruptcy Code was enacted, the yield rate on three-month Treasury bills had begun a
steady climb from a 4–6% range in 1977 to 6–9% in 1978 and into double digit figures to reach an
annualized high of over 14% in 1981. See Fed. Reserve, Statistical Release H15, 3-Month Auction High
Bill Rate by Issue Date (June 30, 2000),
http://www.federalreserve.gov/releases/H15/data/Annual/discontinued_AH_M3.txt.
126 Barbara Randolph, Special Report: The Savings and Loan Crisis, TIME, Feb. 20, 1989, at 68
(estimating cost of bailing out struggling savings and loan institutions at $10 billion in 1983).
127 See GARY TEETRE, FED. DEPOSIT INS. CORP., FDIC, BREAKING FORECLOSURE LAWS NEW
GROUND IN U.S. MORTGAGE LENDING, (2006),
http://www.fdic.gov/bank/analytical/regional/ro20062q/na/2006_summer04.html (describing decline in
savings and loan mortgage originations after regulatory reform).
128 For example, in 1994 Congress passed the Home Ownership and Equity Protection Act (HOEPA),
which created a special class of high cost home mortgages. Pub. L. No. 103-325, §§ 152(a)–(c), 154(a), 108
Stat. 2190, 2191, 2196 (1994). For this class of home loans, HOEPA banned certain practices such as
balloon payments, negative amortization, and default interest rates. See id. § 152(d).
129 In 1994, approximately $10 billion worth of home equity loans were securitized. DANIEL
IMMERGLUCK & KAREN BROOKS, TWO STEPS BACK: THE DUAL MORTGAGE MARKET PREDATORY LENDING,
AND THE UNDOING OF COMMUNITY DEVELOPMENT, WOODSTOCK INSTITUTE 12 (1999). In 2003,
securitization in the subprime market had mushroomed to $203 billion. MARY UNGER, Residential
Mortgage Securitization and Consumer Welfare, 61 CONSUMER FIN. L.Q. REP. 208, 217 (2007); see also
Don Harris, Arnie Nikil & Ricky Ricardo, Neighborhood Patterns of High-
Cost Lending: The Case of Atlanta, 17 J. AFFORDABLE HOUS. & CMTY. DEV. L. 193, 194 (2008) (reporting
that growth in subprime securitization increased over forty-four-fold between 1994 and 2006, from $11
billion to more than $483 billion).
130 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, 527–28
(2000).
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