Understanding the Origins and Impacts of the Economic Crisis…and Moving Forward with Justice 2009 Washington State Access to Justice Conference Justice: Hope and Help in Hard Times john a. powell Executive Director, The Kirwan Institute for the Study of Race & Ethnicity and Williams Chair in Civil Rights & Civil Liberties, Moritz College of Law
Deregulation: In the 1980s, federal deregulation removed state caps and limits on mortgage lending, preempting, in many cases, state laws
Rise in Real Estate Values : The rise in real estate values in the 1980s created much new wealth. This led to “asset-based” lending, loans based on the value of the security rather than the borrower’s ability to repay. This was a crucial change that led to the subprime market
Securitization and Capital Markets : Because mortgages were viewed as safe collateral and increasingly profitable, Investment Bankers became hungry for mortgages for use as collateral in the sale of mortgage backed securities to investors
Wall Street’s hunger for mortgages led to asset-based lending, which fueled the subprime market.
This phenomenon took off in 1994 when $10 billion worth of subprime home equity loans were securitized
By the end of 2005, the volume of securitized loans leaped to $507 billion
Evolution of the Housing Market The Post Depression FHA Era: The Three Party Mortgage Market Pre Depression: The Two Party Housing Market Based on research by Chris Peterson, University of Utah Law School
Created by Chris Peterson, University of Utah Law School Today: The web of actors and institutions involved in the sub prime lending and mortgage securitization market
Lawyers building a case tell a story. Lawyers can use media to shine a light on the plight within their community. Lawyers must create and sustain good working relationships with media by being honest, accurate, and timely.
Lawyers must looking beyond the legal community, and work with housing counselors, neighborhood organizations, and local government. Building coalitions is key.