Offering Critics on the Left and Right a “Gotcha” Opportunity
This whole mess with Fortress calls into question his campaign that has been based on fighting poverty in America. Calling it into question goes beyond showing Edwards may not understand what causes poverty in America but also that he may not have what it takes to do his homework and make the right decisions if elected president.
According to Salon.com, the campaign has defended the investment saying Edwards is “specifically against “predatory” lenders” and that he feels subprmine lenders “perform a useful service in expanding homeownership.” However, in a WSJ article by Christopher Cooper (that you now have to pay for to read) argued that subprime lenders “may fit into the predatory category.” And even “mortgage experts say there's no clear line dividing standard subprime loans from "predatory" ones.”
Thomas Lawler, a former official at mortgage buyer Fannie Mae, offered some insight into predatory loans:
…predatory loans carry high interest rates that are allowed to rise but not drop. They may be loaded with prepaid fees. Lenders may make monthly payments look smaller than they really are by not requiring borrowers to put taxes and insurance in escrow. And the loans generally don't allow early payoff without a steep penalty. That bars refinancing if interest rates drop…
This is essentially the case with many of the mortgages in Louisiana as a “review of some courthouse records in Louisiana shows that Green Tree and Nationstar mortgages carry many of those attributes. Several carry accelerators that allow the already-above-market initial interest rate to nearly double. They also carry penalties for early payoff.”
Visits Cleveland
On July 19, 2007, John Edwards visited Cleveland to specifically talk to people about home foreclosures. At this time, he still had stock in Nationstar and had recently been questioned about Green Tree, which were both subprime lenders Fortress owned in 2007.
Was John Edwards aware of the fact the domestic policy subcommittee was running a series on “urban America”? Had he contacted anyone who was testifying in this series to learn more about subprime loans and predatory lending?
Chairman Dennis Kucinich stated in a hearing held on March 21, 2007 (which essentially kicked off the 2007 series), that it was projected that “one out of five sub-prime mortgages originated during the past two years will end in foreclosure. These foreclosures [would] cost homeowners as much as $164 billion. The exact cost it will have on urban America is unknown. I wonder if any of us in government has a proper understanding of the dimensions of the forthcoming foreclosure crisis…”
The opening remarks are stunning as is the testimony given by people invited to speak to the committee because it explicitly shows how discriminatory practices based on race and class are being instituted.
Dennis Kucinich, as chairman, clearly has done his job and as evidenced in this YouTube video and based on his record of hearings could solve the problem. Interestingly, he did not have to go to work for Fortress to learn anything about subprime or predatory loans.
Final Thoughts: Iowa and South Carolina Foreclosures
After the “Katrina flap,” Fortress was found to have foreclosed on homes in Iowa and South Carolina.
A South Carolina newspaper reported that a subprime lending entity partly-owned by Fortress had “foreclosed on or [was] in the process of foreclosing on 132 homes in South Carolina since Edwards went to work for Fortress in October 2005.” This was not good considering that Edwards was born in South Carolina and Edwards needs to maintain his reputation to win the South, which he needs to carry to be elected.
The Des Moines Register [scroll down for posted article by the Register] covered the Iowa foreclosures saying:
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