The Illinois Attorney General has taken an active role in investigating and prosecuting some of the more blatant abuses that have fed the mortgage and foreclosure crises. The Michigan Attorney General, a captive of the Chamber of Commerce, has done virtually nothing to protect Michigan consumers, despite the fact that Michigan is one of the states hardest hit by the mortgage crisis.
One of the most abusive and unscrupulous practices uncovered in Illinois was the so-called pay option adjustable rate mortgage. It allowed consumers to pay only a fraction of the actual interest charged--thus resulting in a loan that grew each month and a constantly increasing mortgage balance. Both Countrywide Financial and a company called One Source have been implicated in this scandal.
Another procedure under attack is the sale of mortgages which charge enormous penalties if a borrower attempts to pre-pay the balance. Thus, if the adjustable rate increases above market levels, the consumer is trapped in the high rate mortgage and cannot negotiate a new loan at competitive rates without paying charges that may be as high as $10,000.00. The Bush Administration and Congress have talked about addressing this problem, but their proposed solution would allow such pre-payment penalties for up to five years--even though many adjustable rate mortgages can be adjusted upward in the first month after the mortgage is signed!
In an earlier case, the Illinois Attorney General forced Ameriquest, a large national lender, to pay $295 million dollars to consumers to compensate for similar abusive practices. Unfortunately, when we elect arch conservatives to the office of Attorney General in Michigan, we can be assured that we will not benefit from this kind of aggressive consumer protection.