AMERICAN PREDATORY LENDING AND THE
GLOBAL FINANCIAL CRISIS
ORAL HISTORY PROJECT
Interview with
Susan Choe
Bass Connections
Duke University
2020
PREFACE
The
following Oral History is the result of a recorded interview with Susan Choe
conducted by Braelyn Parkman on December 7, 2020. This interview is part of the
Bass Connections American Predatory Lending and the Global Financial Crisis
Project.
Readers are asked to bear in mind that they are reading a transcript of spoken
word, rather than written prose. The transcript has been reviewed and approved
by the interviewee.
Transcriber:
Patrick Rochelle Session: 1
Interviewee: Susan Choe Location: By Zoom
Interviewer: Braelyn Parkman Date: December 7, 2020
Braelyn Parkman: I'm Braelyn Parkman, an undergraduate student from Duke University
and a member of the Bass Connections American Predatory Lending and the Global
Financial Crisis team. It is Monday, December 7th, 2020. I'm conducting an oral
history interview with Susan Choe, who currently serves as Executive Director
of Ohio Legal Help, and previously served as Section Chief for Consumer
Protection within the Ohio Attorney General's office. Susan joins us via Zoom.
Thank you for joining me today.
Susan Choe: Thank you Braelyn and thank
you, Patrick. Appreciate the time to tell kind of my perspective and also my
background with respect to predatory lending.
Braelyn
Parkman: I'd like to start by
just establishing a little bit about your background. I believe you received
both your bachelor's and your J.D. from the Ohio State University. Is that
right?
Susan Choe: That's correct. I'm a
double Buckeye. That's what we call ourselves. That's right.
Braelyn
Parkman: Did you grow up in
Ohio?
Susan Choe: I did. I actually grew up in a little town up in Northwest
Ohio, near Lake Erie. So I've spent most of my life
here in Ohio.
Braelyn
Parkman: Okay. And in the
context of your work life, when and how did you first become involved with
residential mortgages?
Susan Choe: Sure. So I actually right -- so I
have an interesting career. I actually, right out of undergrad -- my degrees
are in economics and I have a chemistry degree as well -- I actually was in
corporate lending for a major bank here in Ohio. So not on the, what we call
the residential or the retail side, but on the corporate. So
I did have some banking experience. But I went to law school to do public
interest work. And so I had a career prior to my law
school. And then I actually post-law school started as a fellow working on
community economic development and actually fair housing issues for an impact
organization in Northwest Ohio. And that's actually when I first started on
looking at home ownership issues and foreclosure. And that was 1997.
Braelyn
Parkman: Okay. What was the name
of that organization that you were working with?
Susan Choe: Sure. So
I worked for the Impact Unit within Advocates for Basic Legal Equality in
Toledo, Ohio.
Braelyn Parkman: Okay. Then I believe you did some legal aid work as well
with Legal Aid Society of Columbus and Legal Aid of Western Ohio. Could you
talk a little bit about what your work was like with those organizations?[1]
Susan Choe: Sure. I worked primarily on housing and then with Legal
Aid of Western Ohio, I was a supervising attorney and I had essentially housing
– excuse me – housing, consumer, and also had oversight over our public
benefits work.
Braelyn Parkman: When you were working with those organizations, what were
some of the more common problems that your clients were facing?
Susan Choe: We saw a lot of evictions, and I think
particularly in Columbus. It is a larger city, currently two million in the MSA
[Metropolitan Statistical Area], so lots of residential evictions. But we started
to see foreclosures as well, similarly with Legal Aid of Western Ohio. And
that's actually when I first started my work with Truth in Lending and
particularly with high-cost mortgages, at that point under the then version of
a HOEPA [Home Ownership and Equity Protection Act]. [I also was]...
learning about some of the mortgage broker activity in terms of some of the
ways that I think folks didn't quite understand these complex financial instruments
that they were executing. And so I would have to
address them post – when they obviously got into trouble. So, adjustable-rate
mortgages being one. I also had cases where folks who had FHA [Federal Housing
Administration] loans unwittingly didn't understand and were convinced to
refinance their home [loans] into more high cost mortgages.
Braelyn Parkman: Okay. ... Did you engage with any decision makers in the
state government in regards to these issues at all
during this time? And what was that like?
Susan Choe: Ohio I think was hit early. So in
some ways ..., and especially in light of some of the fair housing work that I
did, I always look at it as redlining ... redlining prevented communities of
color from acquiring wealth. And then reverse redlining went in and stripped
that same wealth from those communities.[2] So
we saw some of that, [and I worked] with fair housing organizations in terms of
trying to think through that and address that. But then in terms of the state
government, there was emphasis in terms of thinking through some of the
predatory activity. And so that ended up with – I can't remember the Senate
bill number now – but that ended up with some protections then for individuals
related to, in particular, mortgage broker activity and then also related to
appraiser activity.
Braelyn Parkman: Okay. And were those protections enough? Were those
helpful to your clients?
Susan Choe: They were helpful, but they weren't enough. Because … by
the time that it takes, the efforts of advocates, the state to address it, the
damage has been done. And so when the Great Recession
came in '08, it just made something that was bad like just horrible. I started
with the Attorney General's office I think in '06-'07. I actually came in as
Chief of Civil Rights. So my – most of my background
is in fair housing. And so I actually came in and had
done Title VII[3] work
along with the Title VIII work. So [I] came in with Chief of, actually, Civil
Rights. And while we were, while I was Chief of Civil Rights actually led the
statewide efforts on a program that was implemented called Save the Dream. And
that's prior to the Great Recession. Right before.
Braelyn
Parkman: And one more thing I
want to pick up before we get to your work with the Attorney General's office.
I believe you also ran the Student Housing Legal Clinic at Ohio State
University. Could you talk a little bit about your work there?
Susan Choe: Sure. So that was a clinic
that was run as a partnership between Office of Student Affairs and the Law
School. And so it was a clinical program where I had
about 15 students and what we did there was we addressed some of the eviction
and conditions issues off campus. So it really didn't
have a lot of foreclosure issues other than when a student would be impacted by
a landlord's foreclosure. But primarily, it was obviously a skills-based clinic
to address the eviction issues and really off-campus housing conditions issues
off-campus at Ohio State.
Braelyn Parkman: Okay. I believe you started working with the Attorney
General's office in 2007. How would you describe the changes that you saw in
the residential mortgage market from your early career until the start of the
crisis?
Susan Choe: ...By the time I … joined the Attorney General's office
and had, and I also had led that teaching clinic for about three years, it had
gone from, I would say, seeing the problem to now it's just a full blown like
foreclosure wave. Because again, it hit Ohio early and we started seeing the
increases in foreclosures kind of slowly and then much faster. And by the time,
I think that I had joined the Attorney General's office, we were probably, we
had – our foreclosures had more than doubled. I bet it went from like [40,000] –
I kind of remember the statistics now – to like 80,000. And I think during the
height of the Great Recession, 100,000 foreclosures in Ohio. Something close to
that. Residential foreclosures. And so we had seen how
the activity, the predatory lending, and then also the activity of servicers,
right? The – kind of the systemic way in which servicers did not address the
needs of consumers and how that impacted and how that ballooned foreclosures.
Braelyn Parkman: You had joined the Attorney General's office in 2007.
Could you describe your official responsibilities and how they related to the
residential mortgage market?
Susan Choe: Sure. .... The primary responsibility there was to
essentially act as counsel for the Ohio Civil Rights Commission. And the Ohio
Civil Rights Commission has certain pillars under state law, but they obviously
parallel federal law. So, employment, which would be Title VII. It's 4112 in
Ohio, but essentially employment discrimination and then housing
discrimination.[4] ...
Usually the number of cases are employment then
followed by housing. And then we also had public accommodation. Essentially, if
you think of all the federal laws related to civil rights, they fell under
similar state law under the Civil Rights Commission jurisdiction. But in
addition to that, there are certain powers that are given to the sovereign. And
so, at that time, when I came into the Attorney General's office, the Attorney
General at that time was looking to see if there was the ability of the state,
the Attorney General, the sovereign, to bring actions on behalf of the state on
behalf of its citizens. And so there had been some success and there've been
some cases I think out of the first circuit. Eliot Spitzer, the then [New York]
Attorney General, had actually brought some cases in the name of the sovereign
in particular around fair housing. And so, we were looking at different issues.
Braelyn Parkman: Can you describe some of the earlier cases you participated
in with the AG's office that might've involved some of these mortgage and
consumer finance issues?
Susan Choe: Sure. So I can't, I can only talk
in terms of what I would say are public cases, because of the confidentiality
that still applies. But while I was with the Civil Rights Commission, we looked
at a number of cases, some of them that we brought through the Civil Rights
Commission through what we call citizens' complaints related to essentially
where there had been a complaint filed and then there've been a for cause found
related to whether or not a lender engaged in disparate treatment. And then the
way that in terms of reverse redlining, the way it works is that ... some
individual or neighborhood was targeted for a particular type of high-cost loan
based upon either the community, in terms of the –
like is this where African-Americans live? Or was this person maybe steered to
this loan because they were African-American? So they
were kind of one-offs like that. And most of those cases resolved at the Civil
Rights Commission level. Where essentially that individual was able to redress
their loan. Maybe get a better rate as a result of that activity. But no
large-scale cases. That work did not come until I was Chief of Consumer
Protection.
Braelyn Parkman: Okay. In those early cases, how would you describe your
legal strategy?
Susan Choe: Can you give me a little
more in terms –
Braelyn Parkman: For these cases where you were working with reverse
redlining, how were you seeking redress for those loans? Were there particular
laws that were helpful or anything like that?
Susan Choe: Sure. So we're looking really at
Title VIII, which is the Fair Housing Act. And then obviously looking at 4112H,
which is the Ohio equivalent of the Fair Housing Act. But in terms of the
strategy there, it really was trying to address behavior at a more systemic level.
And also obviously ... the allegation is that they
[the borrowers] have been damaged as a result of behavior, redressing the
behavior, and putting them in a position that they should have been had the
discrimination not occurred. And so the goal there
would be to get an appropriate loan for them that they should have been put in
in the first place. But then the idea – and this is why systemic cases are
important – is then to work with the particular servicer or lender to put
together safeguards.
But without a really large-scale
effort, in terms of multiple states, it's harder to do that. Because you really
want to think through a more large-scale strategy because what you want to do
is you want to replace systemic behavior that has been – for whatever the
reason, maybe it was cheaper to do it that way, maybe those are policies that
folks have been doing over and over again, there's biases. ...[Y]ou can try to
address through training. You can try to address through different behaviors.
You can try to address through compliance. But you want to try to bring all of
that kind of, arrows in your quiver to try to address the issue moving forward.
But what you really do need is a coalescence of states and players to try to
make true systemic change happen.
Braelyn Parkman: You then became Consumer Protection Section Chief in 2009.
Can you talk a little bit about that role and maybe what was different about
that role than your earlier one?
Susan Choe: ... [I]t's different because as the Civil Rights Chief,
you have a client, which is the Civil Rights Commission. And when you're the
Chief of Consumer Protection, your responsibility is to your constituents and
to work with the Attorney General in terms of trying to think through like key
policy pillars that the Attorney General may have run on.... So
it's a very public facing section. It's also one of the largest sections in the
office. I went from a staff of about 20, 25 to a staff between 80 to 100
overnight. And so it's just different. We had – the
then Attorney General was Rich Cordray. And so when he
asked me to take on that role I knew that we would be working on foreclosure
and servicer issues. [T]hat was very much part of his strategy to try to
redress some of the consumer protection issues. And we knew that it was a huge
thing that we were trying to take on to redress. And in particular, looking at
servicers and some of the – again, our allegations are there, but obviously
some of the alleged bad behavior they were engaging in.
Braelyn Parkman: You mentioned earlier the Save the Dream program. Could
you expand a little bit on that? What was the impetus for starting that program
and how did it work?
Susan Choe: So we had tens of thousands of folks facing foreclosure in
Ohio, and we wanted to create a singular number or hotline where they could
contact the state. And we could try to get them to help whether it was monetary
or get them to a housing counselor or get them to a legal aid. And prior to
Save the Dream that just didn't exist. So we needed
to, in a sense, create a foreclosure portal, if you will, so that we could get
folks one number, we could promote one number and get them to the help that
they needed. And so it was truly an effort among
multiple state players, including the Department of Commerce that had
jurisdiction over mortgage brokers, but also receive complaints from consumers
and the Ohio Attorney General's office was receiving complaints from consumers
as well.
...I've never seen the state move so
fast.... We met, then Chief Justice Tom Moyer convened a group of us. I think
we met on Martin Luther King Day because that was the day everyone could meet
because we were off that day. And the hotline was up and running with the
appropriate triage. We had worked with Legal Aid, housing counselors, the
finance agency here that funds housing counselors. And we opened the hotline in
April. So we pulled together an agreed upon statewide
triage. We trained customer service, created a data gathering system and opened
our virtual phone doors [in] April. I don't believe April 1st. I think we shied
away from April 1st, but I could be wrong.
Braelyn Parkman: In working on these more sort of systemic solutions, how
did the Ohio Attorney General's office work with other stakeholders,
institutions, maybe other state Attorney General's offices relating to the
crisis?
Susan Choe: …
We really were I think at the
forefront initially....But to be fair, – the
Countrywide settlement was before I became Chief of Consumer Protection. And so
there had been Countrywide and I think AmeriQuest,
and so, the states had worked together before. Not quite the way that we worked
together on the National Mortgage Foreclosure Settlement, it was on a different
scale. But there had been that history. And again, a lot of that's before me,
and I'm glad to provide you folks, some individuals who worked on it kind of during that time. When I came in, Rich [Cordray]
was very clear. He wanted us to come up with a strategy to address issues that
consumers both in Ohio and nationally were seeing with large servicers.
Lost paperwork, constantly being
given the runaround, really being unable to mitigate – go into loss mitigation
and try to address foreclosure issues. People who may have had intermittent
unemployment but now are working again, those mortgages could be redressed.
Number of federal programs that folks could access, but their servicers –
there's just. You name it. I had a whole list of problems that we were trying
to address with respect to mortgage servicers. We had a really data-driven
effort. We had a lot of information, and we worked together with Department of
Commerce here all within obviously confidentiality. And really looked at
consumer issues and did, to be fair, just good old honest investigation. A lot
of work goes into these efforts.
There's a lot of due diligence. And so
we, gosh, we worked 24/7 before we brought our first case against a servicer.
But we learned a lot from those cases. I think, I'm trying to think who our
first servicer case was. But anyways, again, a lot of data. We worked with state
partners within the state of Ohio in terms of trying to look at all the
different issues that we were seeing – and then also really pulling together
consumer complaints. And that's, that's the big part of this. Consumers are
really – and I'm sure I speak for a lot of heads of former consumer agencies.
We need consumers to tell us what's going on on the
ground. Without those consumers, we wouldn't have truly understood. Without
those folks stepping up and saying, yes, you can call me. My investigators talk
to those folks. I mean we kind of knew from kind of gloss data, but you really
have to do good old-fashioned investigation. And without consumers really
stepping up and saying, yes, I will talk to you about my story. None of those
cases would've happened.
Braelyn Parkman: Okay. You mentioned that you brought some cases against
servicers. Could you speak a little bit to what those cases looked like and how
they worked out?
Susan Choe: Well, they were – they’re a lot of work. These are really
large companies. Rich [Cordray] is always ambitious. I remember at one point he
said, well, if we need to, we will basically do a prosecution against X many.
And I – and part of my role as the Chief of Consumer Protection is to say, we
have only so many resources. And that's why those multi-states are so critical
because what you do with the multi-states is that you can bring in the
resources of other Attorneys General's office to then redress behavior on a
national scale. But in terms of those cases, we knew that we would be
addressing an issue where we would get a lot of fight. And to be fair, the
fights initially were purely almost on jurisdiction. Whether or not we had the
appropriate jurisdiction to bring the cases that we did under our consumer
protection statutes.
… We had anticipated that. We also
anticipated potentially being removed from state court into federal court. And
we were. And so we had anticipated those issues and
that's why, I think we brought maybe two or three because we knew that we would
be working on both jurisdiction issues and that we would be initially not
talking about consumers, although that's part of that narrative. We knew that
we would be doing a lot of legal work just on jurisdiction and on removal and
just lots of procedural issues. I think that folks don't often talk about that,
but I mean, that's a big part of the work that we do is that we have to be able
to anticipate issues on jurisdiction, on venue, and
that's what we did for a good chunk of it.
And then I will tell you that we had heard from our Legal
Aid partners that, because we also talked with Legal Aid, I had a communication
channel with them because Legal Aids were doing amazing work on the ground. So I want to make sure that Legal Aids are not lost in this.
And we had heard from our Legal Aid partners that there appeared to be
discrepancies on affidavits, but couldn't quite pinpoint where. And then, and
again, this is the private network of attorneys general. Because in a sense,
the Truth in Lending Act ... talks about that. Those depositions broke, I think
from Maine and maybe Florida, they had been under seal, about the robo-signing. And when the robo-signing
broke, because of all the investigation work that we had, and the fact that we
had reviewed thousands of cases at that point, we were quickly able to bring
that story together on the robo-signing. And I think
we were the first state to file on the robo-signing
issue. Our GMAC case was the first on the robo-signing
issue. But I don't think we could have done that without all the lessons
learned from the prior cases that we had filed with respect to servicers.
Braelyn Parkman: ...The last piece of the story I really want to talk about
is the National Mortgage Settlement in 2012. Could you describe your role
during those negotiations and what that process looks like?
Susan Choe: Sure. So I can only talk so much.
But, so we were – Ohio was on the Executive Committee. The primary
negotiations. So like in terms of the final settlement
– was done by the five, I think it was five states that were part of the final
negotiations. And then Ohio was on the Executive Committee that helped steer
those negotiations in terms of redressing the damage that was done to the state
and to constituents. So, the final parameters of that with a cash settlement
portion that went to the states to try to redress behavior and then to damages.
And then the credits that went in, in particular related to principal
write-downs and things like that, that was part of a multi-year effort. Because
each of the states, we had all learned collectively the pieces that worked and
didn't work as part of prior settlements.
And the other part too that was
particularly important was compliance and the role of the eventual person or
organization that would have oversight over the settlement itself. Because I
think from just prior learnings, it was critical that there be good oversight
over the settlement to make sure that what was negotiated to was implemented
and implemented appropriately. And so kind of weaving
in the prior lessons learned, I think all went into the settlement and then –
but at the end of the day, you're negotiating for 50 states. And so we had to be really cognizant of the fact that we were
negotiating for 50 states because it was one of the few multi-states that I was
a part of when I was with the Attorney General's office where I think we filed
GMAC and then [the] National Mortgage Executive Committee came together within
a month, which I've never seen anything coalesce that quickly.
And then, I think from the time that
it coalesced, within two years, we had the settlement, which again was fast.
And I think that that showed the urgency of the issue. And I think it also
showed the urgency of the issue for consumers. But it was critical that there
be a cash portion for states to redress behavior. It was critically important
that consumers not only get some dollars to redress damages, but it was really
important that there – so I always think of it this way. So
the servicers through, I would say, neglect, not making investments, had
systematized bad behavior. And so it was really
important for Ohio, and I think the other states, to try to basically create a
better servicer system, make sure that it was something that would be national
because we wanted to make sure that we systematize good behavior.
I think critics will say that it's unclear the full
success of that. But I will tell you it's been interesting with the pandemic. So Ohio Legal Help, I always say, like I know based upon our
data and our consumers, so we have over 50,000 folks on our portal now each
month. We opened about a year ago. And I'm not seeing complaints on
foreclosure, ... although I'm seeing a ton of stuff on evictions, I'm seeing a
ton of stuff on unemployment. And our portal is pretty sensitive to data.
Because right now, the second most trending topic on our website is stimulus
checks because everybody in the country right now desperately needing cash to
redress evictions. Like we've seen evictions ha[ve]
been number one for the last couple of months, followed by, to be fair,
unemployment, but this is the first week.
So it's been interesting. I have not
seen foreclosures trend, and I've actually gut checked with our Legal Aid
partners as well. And while those are issues, they're not seeing servicers come
up over and over again. So it's been interesting.
I think that that is actually a
hallmark of the National Mortgage Foreclosure Settlement in that I think
servicers may be trying to redress this early. And I will also say that by
getting ahead of it in terms of allowing the 12 month forbearance, I think we
learned as a country that it's critically important to do that. So, I do think
that there was some success from the National Mortgage Foreclosure Settlement.
That, there's the money, but then what you really want to do is change behavior
because that is what really for the family that is facing foreclosure, that's
what you really need. And so I have seen some inklings
of that. And so I've been happy with that. Happy being
a relative term right now. But yeah, to see that actually come forward and to
see it in the data in my current work.
Braelyn Parkman: Okay. We have a couple of questions that we ask everyone
to sort of conclude the interview. So the first one
is: Over the last decade, we've seen a number of different narratives emerge to
explain the financial crisis. And how do you understand what caused that
crisis?
Susan Choe: I laugh. Okay. I'm going to be really good. So, I think
there've been a lot of narratives. I actually – so the one narrative which I
disagree with, is that, and I think the Federal Reserve spent time actually
addressing this was that there was a narrative that the CRA, the Community
Reinvestment Act, somehow caused the financial crisis. And I would vigorously
disagree with that. I think at the end of the day there was, I guess I am more
of the narrative is that as the mortgage market became more and more
commoditized, and there was cash available in the system. There was a drive and
those financial incentives drove us into the financial crisis. I'm not going to
go into everything related to the secondary market, other than I can tell you
when I was a newly minted Legal Aid attorney, seeing the foreclosure plaintiff
as series 1997.[5] And
then, I was just confused because they don't teach you securitization and
secondary markets in law school. But I really do believe that that is what
drove the financial crisis. It wasn't the CRA. Other than, I think you had
communities of color who had been starved of credit. And so, when credit became
available, they did it, but it wasn't CRA that drove it.
Braelyn Parkman: And looking back on the crisis a
decade later, what do you see as its most important lessons for state level
policy makers and public servants like yourself?
Susan Choe: Get ahead of it. Plain and
simple, get ahead of it. It is bad for the state as a policy. You want
homeowners in their homes just like you don't want folks evicted. Just a social
crisis. There is good data out there about how – I don't care like how you want
to take it. Driving someone from their homes, it – what it does is it prevents
kids from matriculating in school and graduating. It prevents families from
building any type of wealth on their own and stabilizing communities. There are
communities out there, they're just hollow because of the crisis. So, folks
need to get ahead of this and folks need to work together to prevent it.
[END OF
SESSION]
[1] Choe served with the Legal Aid Society of Columbus from July 1998 – October 2000 and with the Legal Aid of Western Ohio from November 2000 – March 2004.
[2] “Redlining is the practice of denying credit to particular neighborhoods on a discriminatory basis. The flip side is reverse redlining, the practice of targeting these same communities or protected classes for predatory lending.” Definition pulled from, “Reverse Redlining, Discrimination, and For-Profit Education.” National Consumer Law Center. August 19, 2011. https://www.studentloanborrowerassistance.org/reverse-redlining-discrimination-and-for-profit-education/#:~:text=Redlining%20is%20the%20practice%20of,protected%20classes%20for%20predatory%20lending .
[3] Title VII of the Civil Rights Act of 1964 “prohibits employment discrimination based on race, color, religion, sex and national origin.” Definition pulled from, “Title VII of the Civil Rights Act of 1964.” U.S. Equal Employment Opportunity Commission. https://www.eeoc.gov/statutes/title-vii-civil-rights-act-1964#:~:text=Title%20VII%20prohibits%20employment%20discrimination,Rights%20Act%20of%201991%20(Pub.
[4] “It shall be an unlawful discriminatory
practice: (A) For any employer, because of the race, color, religion, sex,
military status, national origin, disability, age, or ancestry of any person,
to discharge without just cause, to refuse to hire, or otherwise to
discriminate against that person with respect to hire, tenure, terms,
conditions, or privileges of employment, or any matter directly or indirectly
related to employment… (H) Subject to section 4112.024 of the Revised Code, for
any person to do any of the following: (1) Refuse to sell, transfer, assign,
rent, lease, sublease, or finance housing accommodations, refuse to negotiate
for the sale or rental of housing accommodations, or otherwise deny or make
unavailable housing accommodations because of race, color, religion, sex,
military status, familial status, ancestry, disability, or national origin”.
Definitions pulled from, “Chapter 4112: Civil Rights Commission”. http://codes.ohio.gov/orc/4112#:~:text=(A)%20For%20any%20employer%2C,conditions%2C%20or%20privileges%20of%20employment
[5] Choe’s reference to “series 1997” alludes to a type of case caption, which according to her would sometimes alarm homeowners as the entity suing them appeared to have no connection to their home loan.