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42 Loy. L. A. L. Rev. 529 (2008-2009)
Preventing Predatory Lending in the California Subprime Mortgage Market

handle is hein.journals/lla42 and id is 539 raw text is: PREVENTING PREDATORY LENDING IN THE CALIFORNIA SUBPRIME MORTGAGE MARKET Ronald Law* Examining the origins of the California subprime mortgage crisis, this Note attempts to explain why California legislation failed to deter predatory lending practices in the subprime mortgage market. Specifically, California Financial Code Division 1.6, which was enacted in 2001 to prevent the proliferation of unjust mortgage loans, contains several fundamental flaws. Although California chaptered Senate Bill 385 into law in 2007 to increase oversight of the subprime mortgage market, this legislation is insufficient to curb predatory lending practices. To address the hazards of inadequate underwriting standards, yield spread premiums, standardized disclosure, and reduced-documentation loans, this Note proposes a six-part legislative solution to the predatory lending problem. 1. INTRODUCTION Predatory lending has contributed significantly to the collapse of the subprime mortgage market in California.' In 2001, California enacted Financial Code Division 1.6 to deter predatory practices in subprime lending.2 Unfortunately, this legislation has proven to be insufficient to prevent the proliferation of unjust loans? Recognizing the need for greater regulation, the California Senate in February 2007 introduced Bill 385 to further address the predatory lending issue.' This bill was chaptered into law in October 2007.5 The provisions of Bill 385, however, are vague and incomplete. J.D. Candidate, 2009, Loyola Law School, Los Angeles; B.B.A. 2006, Simon Fraser University, Vancouver. I would like to thank Professor Lauren Willis for her contributions to this Note. I would also like to thank the editors and staff of the Loyola of Los Angeles Law Review for their invaluable assistance. Last but not least, I would like to thank my family and friends, who taught me that the most important things in life are not things. 1. See infra Part II. 2. Am. Fin. Servs. Ass'n v. City of Oaldand, 104 P.3d 813, 815 (Cal. 2005). 3. See infra Part V. 4. S.B. 385, S. 2007-2008, Reg. Sess. (Cal. 2007).

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