Although Nicholas Bagley's article is keyed to Georgia's experience with the Office of the Comptroller of the Currency's stance on state subprime lending laws, North Carolina also was heavily involved in the issue, which came to a head early in 2004.

An N&O news story April 8, 2004, reported that state Attorney General Roy Cooper and Martin Eakes of Durham (head of the Center for Responsible Lending and the Self Help Credit Union) "voiced strong opposition at a U.S. Senate hearing Wednesday to new rules that undercut states' abilities to police unscrupulous banks.

"The rules, issued in January by the Office of the Comptroller of the Currency, prevent states from enforcing 'predatory lending' and other consumer-protection laws against nationally chartered banks and their subsidiaries," the article said. It pointed out that North Carolina was a pioneer in passing a predatory lending law in 1999.

That 1999 law targeted mortgage abuses by both national and state-chartered banks, but the comptroller's action stripped away the state's authority to enforce its law against national banks. The North Carolina law included limits on prepayment penalties and banned balloon payments, the large fees imposed at the end of a loan. The legislation limited fees to no more than 5 percent of a mortgage's total value.

An earlier news story, published Jan. 9, 2004, shortly after the Office of the Comptroller of the Currency issued its new rules on state predatory lending laws and national banks, reported a warning by Lissa Broome, a professor of bank law at UNC-Chapel Hill. Broome said some banks with state charters might swap them for federal ones, and that mortgage lenders and consumer finance companies could also circumvent the law by partnering with national banks.

" 'This is a big, big blow to our [predatory lending] law,' Broome said."

According to a 2004 article in USA Today, "North Carolina is probably the state that has been most scrutinized. Its 1999 law bars financing credit insurance as part of a mortgage and prohibits loan flipping, a practice in which loans are repeatedly refinanced with high fees and other charges that strip out equity but provide no real benefit to the borrower. The law prevents prepayment penalties on certain loans."

The USA Today article, published in December 2004, said "Lenders are concerned about state laws that impose liability on individuals or institutions for dealing in mortgage-backed bonds that are found to contain predatory loans -- even if the bond holders or underwriters were not engaged in predatory lending. Standard & Poor's, which rates the quality of bonds, has refused to rate mortgages from some states with tough laws."

But officials at the Office of the Comptroller of the Currency said states' concerns are "overblown, pointing to its large staff of examiners. It sees little evidence of predatory loans in [national] banks," the article concluded.

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