A new UNC Center for Community Capital study found that national banks that did not comply with tough state laws due to federal preemption made riskier loans than the state-regulated lenders.
States that adopted tough anti-predatory lending laws have lower foreclosure rates than states that did not, according to University of North Carolina researchers.
"It appears that state laws did a better job of ensuring home loan quality than federal regulation, but their impact was diminished by preemption after 2004," said Robert Quercia, director of the UNC research center.
After the Comptroller of the Currency invoked preemption, subprime lending by national banks increased in those states with strict predatory lending laws and their share of the subprime market jumped from 9% to 20% by 2007, according to the UNC Center study.
North Carolina was one of the first states to enact a predatory lending law and it became a model for other states.
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