Pub. 8 2017 Issue 1

www.wvbankers.org 14 West Virginia Banker Lobbyists Set Their Sights on the Volcker Rule and Look to Senator Manchin to Help By Nicholas P. Mooney II, Spilman Thomas & Battle N ear the end of 2007, the United States was hit by the subprime mortgage market meltdown. For years, before, the public had experienced a steady increase in home prices and a seemingly never-ending supply of mortgage lending. Homeowners were able to enjoy ever- increasing home equity and mortgage products, virtually guaranteeing that anyone who wanted to get financed could. Homeowners took advantage of this, sometimes financing and re-financing homes multiple times and using the newfound equity to consolidate other debt or to spend elsewhere. What we now know is that the rise in home prices soon would end, and the mortgage market that looked robust on its face was built on adjustable-rate loans, interest-only loans, loans given without verifying employment, mortgage-backed securities, and collateralized debt obligations. When home prices began to level off, consumers saw the gains in their eq- uity slow. Without a way to refinance again, consumers were over-extended, and they began to default on their mortgage loans. That is not to say consumers alone caused the meltdown. There has been no shortage of regulators and commentators who have criticized banks for what they saw as risky invest- ments in subprime mortgages and questionable lending tactics. Ultimately, the subprime mortgage meltdown would spread to other financial sectors and lead to what widely has been regarded as the worst financial crisis since the Great Depression of the 1930s.