An unlikely coalition of mortgage lenders and left-leaning consumer advocate groups are urging the Obama administration to let up on lawsuits against banks that lend to people with suboptimal credit histories.
In their proposals, the Mortgage Bankers Association, 15 left-leaning advocacy groups, and researchers from the Urban Institute and Moody’s Analytics, say that borrowers who narrowly qualify for loans are being denied safe mortgages because the banks fear being sued or hit with financial penalties under current rules.
The proposals could also curtail the government’s ability to pursue banks for minor mistakes, such as misstating a borrower’s income by a negligible amount, an administrative error that could expose a bank to three times the damages.
The Department of Justice has relied upon current rules to extract multi-million dollar settlements from banks including J.P. Morgan Chase & Co., Bank of America Corp., and SunTrust Banks Inc., with pending litigation against major lenders such as Quicken Loans Inc.
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