Broke USA Part 8

The CRL would naturally focus on exploitative subprime mortgages. The problem had grown only more acute since they had sided with Freddie Rogers in his fight with a.s.sociates and there was no doubting their authority in this realm. Kathleen Day remembered when she was covering the banking industry for the Washington Post Washington Post and for the first time saw Eakes testify before Congress. Most striking, said Day, who now runs the CRL's public information office, was how differently Eakes came across compared to the other consumer advocates speaking that day. "He starts off telling people he's been in this business for twenty-five years," Day remembered. "And he tells the committee, 'You can't tell me it can't be done because I'm doing it, and I'm doing it right without s.c.r.e.w.i.n.g people.'" The banking lobbyists Day happened to share a cab with after the hearing were all in a huff about Eakes, she said. They didn't say he was wrong: They didn't say he didn't know what he was talking about. "All they could say," Day recalled, "is that they thought he was sanctimonious." and for the first time saw Eakes testify before Congress. Most striking, said Day, who now runs the CRL's public information office, was how differently Eakes came across compared to the other consumer advocates speaking that day. "He starts off telling people he's been in this business for twenty-five years," Day remembered. "And he tells the committee, 'You can't tell me it can't be done because I'm doing it, and I'm doing it right without s.c.r.e.w.i.n.g people.'" The banking lobbyists Day happened to share a cab with after the hearing were all in a huff about Eakes, she said. They didn't say he was wrong: They didn't say he didn't know what he was talking about. "All they could say," Day recalled, "is that they thought he was sanctimonious."

The payday lending industry would be CRL's second priority. Martin Eakes and Self-Help were too invested in that fight to consider dropping it, especially once they had the money to build a national organization. Their third and final priority would be the more predatory side of the credit card industry, including practices the consumer activists called "fee harvesting." The insidious part of fee harvesting is that the consumer, her credit damaged and her funds tight, starts off feeling grateful that a lender is willing to trust her with a credit card. But then she receives the first bill. There are card activation fees and origination fees (commonly $100 or more) billed as a cash advance and also an "account maintenance fee" (maybe $10 a month). The fees eat up a goodly share of the available credit, typically between $300 and $500, and therein lies another huge moneymaking opportunity for the card issuer: the fine for going over your available limit. In time, the CRL would also add banks to their list of targets and specifically the overdraft fees they charged. "These fees are becoming the main profit center for these banks," Eakes said, "which means they're making the bulk of their profits off their poorest customers." Still, the CRL would devote a lot more time to fighting the mortgage lenders and the payday advance industry than to battling the banks that were issuing subprime credit cards.

The payday lenders lost in North Carolina in 2001 and then again a few years later in Georgia and Arkansas. Even so, they were slow to recognize that they were in an existential fight for their livelihood. "These were three very different situations," Billy Webster said. North Carolina was Martin Eakes, Georgia boiled down to the political clout of the industrial loan stores that Roy Barnes had battled, and Arkansas was a quirk: A legal battle they lost because Arkansas is the only state in the union with a usury cap (17 percent) written into the state const.i.tution. Still, the same year that they lost in Georgia, the big chains hired Dezenhall. We need to be more aggressive, Webster explained in an American Banker American Banker article about the payday lenders "going on the offensive." We need to explain to people that a payday advance is cheaper than missing a credit card payment or a series of bounced checks. Steven Schlein had just been hired but he was not wasting time. The Center for Responsible Lending might sound as if it has the best interest of consumers at heart, Schlein said, but he shared with article about the payday lenders "going on the offensive." We need to explain to people that a payday advance is cheaper than missing a credit card payment or a series of bounced checks. Steven Schlein had just been hired but he was not wasting time. The Center for Responsible Lending might sound as if it has the best interest of consumers at heart, Schlein said, but he shared with American Banker American Banker a report he had put together dismissing the CRL as nothing but a front group for a Durham-based credit union. a report he had put together dismissing the CRL as nothing but a front group for a Durham-based credit union.

But payday hardly seemed an industry in need of outside help. As rapidly as payday had grown in its first seven years, it grew more rapidly still over the next few years; where there were 10,000 payday stores in 2000, that number exceeded 21,000 by 2004. Success inspired more success. As industry trailblazers such as Check Into Cash, Check 'n Go, and Advance America continued to thrive, large companies that had grown rich feasting in other corners of the poverty universe started offering payday loans. That included chains in the check cashing, p.a.w.n, and rent-to-own businesses. Regional powerhouses such as the MoneyTree in the Northwest helped to fuel the expansion, as did people like Mike Hodges. Hodges was twenty-four when he opened his first payday store in Nashville, in 1996. By 2008, Advance Financial was operating twenty stores within thirty miles of Tennessee's state capital.

And there were those late to the poverty business who were no less eager to make their fortune. Just as Mike Hodges was poring over maps in search of gaps in the Nashville metro area, so too were people like Erich Simpson, a former DuPont factory worker who opened his first of three payday shops in a rural stretch of South Carolina in 2004. The industry would add two thousand more stores in 2005.

The big payday chains even started to sp.a.w.n their own compet.i.tion. Jones would grumble about the mid-level managers who gave notice "thinking that making it was as easy as figuring out what kind of plane they was gonna buy." Billy Webster voiced the same complaint. Greg Fay served in the army for seven years right after high school, then went to work first in the rent-to-own business and then in payday finance. When Fay came into a little money, he opened his first payday store just outside Dayton in 2003 and was soon eyeing locales in and around Toledo, 150 miles up the highway. Ultimately he, his partner, and an outside pair of investors would open a half-dozen stores in western Ohio.

The issue of whether Wall Street could fully embrace payday lending was put to rest in 2004 when Advance America announced that it was going public and that Morgan Stanley, a top-tier investment bank, led the offering. The investment banking arms of Wells Fargo and Bank of America were among those lending their names and sales teams to the effort. If there was a taint to payday, the 23 percent profit margin Advance America was reporting in its prospectus made it all okay. Usually only the most successful technology companies consistently posted numbers that good.

The bankers had priced Advance America stock at between $13 and $15 a share. It opened at $15 and then soared above $21 before closing at $20.50-a 37 percent jump in one day of trading. Billy Webster had cashed out around $9 million worth of stock but still owned shares valued at more than $100 million. His partner and financier, George Johnson, cashed out $22 million in stock that day but still owned a $260 million stake in the company.

The numbers Advance America was posting naturally attracted even more wannabe moguls to the business. Every year at the annual meeting of the payday lenders, Steven Schlein rubs shoulders with some of the new arrivals, who give him hope for the industry. "You walk around and you think you're seeing all of America in one room," Schlein said. The crowd skews white, he acknowledged, but otherwise they strike him as a perfect cross-section of America, with people old and young and from all regions of the country. Schlein told me of a kid he had recently met who had gotten into payday lending while he was still in college but already owned five stores. "Think how rich he's going to be when he already has five stores at twenty-two," Schlein said.

But if Schlein was brightened by the native entrepreneurialism of a can-do country, Billy Webster was worried that he was witnessing his own doom. "One of the things I never dreamed would happen is we would have so many people in this business," he told me when I visited him in Spartanburg. As a reference point, he harked back to his decade in the fried chicken business. "You'd never have seen a Popeyes and a KFC on the same corner as a Bojangles," he said, "but that's what you have now [with payday lending stores]. So you end up not just with saturation problems from a business perspective but also multiple loan problems."

Inside the CRL they dubbed themselves the "road warriors." These were the staffers so committed to defeating the payday lenders or their counterparts in the mortgage industry that they proved willing to turn their lives upside down and live in another state for weeks, if not months at a time. Martin Eakes described one of the warriors, Uriah King, as a "human vacuum cleaner sucking up everything he could about payday." King, who read Clausewitz on war to gird himself for battle, could drive him batty, Eakes said, but what King lacked in experience he more than made up for in energy, enthusiasm, and native savvy. It fell to people like King and his colleague, Susan Lupton, to help fill in the narrative and demonstrate that the payday advance was, to borrow a vivid metaphor from Robert H. Frank, an economics professor at Cornell University, like "handing a suicidal person a noose."

It helped that Advance America and a second payday company, QC Holdings, a chain of three hundred stores based in Kansas City, went public in 2004. The doc.u.ments both companies are required by law to regularly file with the Securities and Exchange Commission have provided a treasure trove of information. So too have the quarterly conference calls that most publicly traded companies routinely record and post on the Internet as well as the detailed reports written by financial a.n.a.lysts who earn money selling stock advice to wealthy clients.

From the start, the payday lenders have said theirs is an occasional emergency product used by the rational consumer facing the prospect of a bounced check. Yet those in the business of following the industry seemed to come to precisely the opposite conclusion. "A note about rollovers," an a.n.a.lyst named Elizabeth Pierce with Roth Capital Partners wrote in a research report about First Cash, a p.a.w.nshop chain that had gotten into payday. "We are convinced the business just doesn't work without them." That view was echoed by the accounting firm Ernst & Young: "The survival of payday loan operators depends on establishing and maintaining a substantial repeat customer business because that's really where the profitability is." Even Dan Feehan, the chief executive of Cash America, the country's largest p.a.w.nshop chain and another major player in the payday industry, said much the same when explaining the business to potential shareholders at an investor's conference. "The theory in the business," Feehan said, "is you've got to get that customer, work to turn him into a repet.i.tive customer, long-term customer, because that's really where the profitability is."

The CRL was convinced the payday cash advance was an inherently defective product, trapping people as if by design. The single mother with two kids might be avoiding a costly bounced-check fee that first time she borrows $400 but how is she ever going to cover that $460 check two weeks later when she brings home $1,100 a month? "They sucker you in with that first loan," Eakes said, "and then they gotcha." It became essential, then, to collect the tales of customers like Sandra Harris, an accounting technician in Wilmington, North Carolina, who borrowed $200 from a payday lender to pay her car insurance after her husband lost his job as a cook. Eight thousand dollars in fees later, the couple ended up losing the car and avoided eviction only because of a sympathetic landlord. John Kucan, a former Connecticut state trooper, had a less tragic story but one offering no less flattering a view of payday. He retired to North Carolina after being shot in the line of duty but then needed to borrow $850 from a payday lender because the state had overpaid some benefits and wanted its money back. Living on a fixed income, however, Kucan would need to renew the loan fifteen times, racking up $2,000 in fees before he was able to pay it off. When you're desperate for quick cash, he told one interviewer, "what's flashing in front of you is the dollars you're looking for. The percentage rate isn't something you're even considering."

The CRL's first big media triumph came in the spring of 2005, when CBS correspondent Scott Pelley traveled to North Carolina to report on the state's efforts to evict the payday lenders from within its borders. Sandra Harris told her story, as did John Kucan. Listeners also heard from a woman named Ginny McCauley, who ran an Advance America store in Illinois for six years. McCauley estimated that 60 to 70 percent of her customers were rollovers during that time. Pelley asked Jim Blaine, the CEO of the State Employees' Credit Union of North Carolina, what he would tell someone who was planning on taking out a payday loan. "I'd say go get a loan shark," Blaine said. "They're cheaper." A typical loan shark, he explained, only charges an APR of around 150 percent.

The only payday lender willing to talk on camera was Willie Green, a former NFL wide receiver who opened his first payday store as his playing days were ending in the mid-1990s; he ultimately opened ten stores. Pelley asked Green, who was from a poor background, what he would say to a Sandra Harris, who had lost a car and almost a home. "How about, 'Thank You, Mr. Green or Mr. Check Casher or Mr. Payday Advance Store for helping me out when I was in a time of need?'" Later in the segment, when Pelley brought up the prospect of Green's wife taking out a payday advance, he essentially confessed that she was too smart for that. "She has a master's degree in accounting," he said.

The next year brought another body blow to the industry. This time it wasn't the CRL leading the charge (though Eakes's group would provide critical behind-the-scenes lobbying help) but the commanding officers at military bases around the country, unhappy that the payday operators had opened so many shops outside their gates-"like bears on a trout stream," a pair of academics concluded in a 2005 study of the geography of payday lending. Was it any wonder, given that the country's military bases were thick with young, financially inexperienced people getting by on modest salaries? In the mid-2000s, the typical army private first cla.s.s started at an annual salary of $17,000 a year and nearly three-quarters of active-duty military personnel never made more than $30,000 a year. There were reports of soldiers discharged because they defaulted on a loan and many others were stuck stateside because of a military rule that stated that anyone owing more than 30 percent of his or her salary could not be dispatched overseas. "I have guys guarding my gate here when they should be deployed in Iraq," the commanding officer at a naval base in San Diego told the a.s.sociated Press. The CRL waded into the fight with a study concluding that one in five active-duty military personnel had taken out a payday loan in the previous year versus one in every sixteen adult Americans. At Fort Bragg, North Carolina, credit counselors said they were seeing an average of two to three soldiers a week who owed money to a payday lender, according to a report cited by Bloomberg Markets Bloomberg Markets.

To the extent that the payday industry has clout on Capitol Hill, it's in the Senate Financial Services Committee, but this fight was waged instead in the Armed Services Committee. In the summer of 2006, Senator Jim Talent, a Missouri Republican, and Senator Bill Nelson, a Florida Democrat, added an amendment to the annual defense authorization bill that capped the rate military families would have to pay for a payday loan at 36 percent. It pa.s.sed, and when the defense authorization bill became law that fall, payday lenders could charge active-duty personnel no more than $1.38 on every $100 they borrowed. With a stroke of the pen, the country's payday lenders were essentially banned from doing business with the military. It didn't elude the industry that it wouldn't take much of a logical leap for a legislative body to conclude that if payday loans were so destructive to the emotional and financial well-being of America's fighting men and women, they might also be harmful to some of their other const.i.tuents.

At the start of 2006, people inside Self-Help and the CRL started to notice a spike in the number of subprime home loans. Even as late as 2003, subprime accounted for only 8 percent of the overall residential mortgage market, but by 2006, subprime loans accounted for more than one in every four home loans written-28.7 percent of the mortgage market, according to the Fed. Worried that this would spell doom for the home ownership dreams of a great many low- and moderate-income people, a research team was created inside the CRL to predict what might happen. Ellen Schloemer, the CRL's research director, told me that their conclusion, that this trend would lead to 2 million subprime foreclosures, was so incredible that they rewrote a report they called "Losing Ground" six times before releasing it at the end of 2006. The Mortgage Bankers a.s.sociation denounced the study as wildly pessimistic but in time it would become clear this was one of the few early warnings of the economic carnage to come. "That study really put us on the map in Washington," Mike Calhoun said. At the start of 2008, the publication Politico Politico declared that the CRL was "the main intellectual engine driving the Democratic response to the housing crisis" in no small part because "the Center has been more right than wrong." That same year the Federal Reserve Board would single out the CRL for its research when appointing Mike Calhoun to a three-year term on its Consumer Advisory Council. declared that the CRL was "the main intellectual engine driving the Democratic response to the housing crisis" in no small part because "the Center has been more right than wrong." That same year the Federal Reserve Board would single out the CRL for its research when appointing Mike Calhoun to a three-year term on its Consumer Advisory Council.

Steven Schlein, though, has not been nearly as impressed with CRL's research capabilities. "They do not do scholarship," Schlein said. "It's a joke what they call a study. They're done by a bunch of twenty-four-year-old kids sitting in some office in North Carolina, plucking numbers from out of the air."

In fact, some of CRL's payday reports have tended to overreach. Its first big industry study, for instance, released in 2006 and called "Financial Quicksand," a.s.serted that 90 percent of the revenues payday lenders collect in any given year are "stripped from trapped borrowers." Under the CRL's definition, though, a trapped borrower was anyone taking out as few as five payday loans a year. The study also alleged that the "typical" payday borrower ended up spending nearly $800 to repay a single $325 loan, or more than $450 of acc.u.mulated fees. That's because the average payday customer, the CRL found after examining data from eight states, took out nine loans per year. Inside the CRL, they a.s.sumed that meant a person took out a single loan and then flipped it eight times before paying it back, but it seemed just as reasonable to conclude that the typical borrower took out a new loan every few months but needed an extra couple of payments to wipe out the debt.

But one could also ask what difference it made. Maybe five loans a year didn't call to mind a "trapped" borrower but it also didn't conjure up the customer needing a bailout because (as Willie Green had told Scott Pelley) "G.o.d forbid, an emergency comes up where the refrigerator goes out or the child needs to go to the doctor." And did it make much difference whether a person flipped a single loan eight consecutive times or took out multiple loans in a given year? The bottom line was the same: nearly $500 in payments to a payday lender rather than money that might otherwise go into a savings account.

The industry would again find fault in some of the more sweeping a.s.sertions made within the CRL's next big study, "Springing the Debt Trap," released in 2007. But the power of that report wasn't in its conclusions; it was in the data the CRL collected from states that tracked and published customer usage statistics. In Colorado, for instance, one in seven payday borrowers in 2005 remained in debt for at least six months before paying back a loan. Regulators there also found that customers taking out twelve or more loans in a year generated 65 percent of the industry's revenues in the state. Other states reported similar findings when singling out those taking out twelve or more loans in a year: Oklahoma (64 percent of their revenues from this group), Florida (58 percent), Washington state (56 percent). At least one in five borrowers in each of those four states had taken out twenty-one or more loans in a year. In this regard, the APR no longer seemed an imprecise measurement of what was in fact a fee but a close approximation of the interest a good portion of the industry's customer base was paying for its short-term cash needs.

The number of loans the average payday consumer took out in a year was another point of contention. Industry sources tended to say seven or eight loans per year while payday's critics claimed those numbers lowballed the problem. The Woodstock Inst.i.tute, an advocacy group based in Chicago, concluded that the average payday user in Illinois took out thirteen loans in a year. Policy Matters, a liberal research group based in Cleveland, would reach the same conclusion about borrowers in Ohio. John Caskey, a sociology professor at Swarthmore College and the author of Fringe Banking Fringe Banking, studied payday lending in Wisconsin in 2000. He found that 49 percent of the state's payday borrowers had taken out eleven or more loans over a twelve-month period and that nearly one in five borrowers had taken out twenty or more loans during that time. There was no dispute over the size of the average payday loan, however: $325.

The industry tended to cite one of two studies. One was by Donald Morgan, a researcher at the New York branch of the Federal Reserve who sought to test the thesis put forward by CRL and others that a payday advance was a "predatory debt trap." According to his research, people in North Carolina and Georgia, two states that had recently banned payday loans, bounced more checks and filed for Chapter 7 bankruptcy at a higher rate than people in states where payday loans were available. Studies by researchers inside academia, though, have shown precisely the opposite, at least on the issue of bankruptcies; relying on payday loans, several studies have found, accelerates the chances that a person will declare bankruptcy. The CRL also cast doubts on the bounced-check claim by noting that Morgan used data from large stretches of the South as a proxy for Georgia and North Carolina.

The other study that advocates of payday lending quote was written by an economics professor at Indiana Wesleyan University named Thomas Lehman. "You cannot read Dr. Lehman's work without walking away thinking payday lending is absolutely necessary and, if used responsibly, an absolute G.o.dsend," said Larry Meyers, a former screen-writer turned pro-payday blogger ever since he and a partner started investing in budding payday chains. Yet while journalists regularly quote the CRL in articles about payday, Meyers complained, they never quote Lehman. While testing that hypothesis I came across Lehman's name in BusinessWeek BusinessWeek. He wasn't mentioned in an article about payday, however; it was about seemingly independent voices who are in fact "quietly financed by powerful interests." Lehman served as BusinessWeek BusinessWeek's poster boy for the practice after he confessed to the magazine that in fact the industry had paid him to do his study.

Martin Eakes figured he must be doing something right. He had enough critics throwing mud at him to convince him the CRL was having an impact. One of the sillier attacks came from a group that called themselves the Consumers Rights League, a name chosen presumably so they could appropriate the CRL acronym. They dubbed the original CRL a "predatory charity" that contributed to the world's economic woes in 2008 by promoting "public panic" about the subprime meltdown.

One of the nastier a.s.saults has come at the hands of a group called the Capital Research Center, a D.C.-based think tank that keeps tabs on liberal advocacy groups. Eakes's longtime friend Tony Snow, a conservative stalwart, compared his old running buddy to Jack Kemp, an active combatant in the war on poverty while serving as a Republican representing the Buffalo area in Congress. Eakes even uses the same term to describe his politics-he calls himself a "bleeding-heart conservative"-as did Kemp, a former vice presidential candidate and the director of HUD under the first President Bush. Yet Eakes was more liberal and therefore a foe. "A Leftist Crusader Wants to Dictate Financial Options to Consumers" was the headline over the first of several unflattering pieces about Eakes that the Capital Research Center published. Among Eakes's various crimes: He uses Self-Help to "form political coalitions with radical left-wing groups whose purpose is to bully banks into changing their lending practices" despite Self-Help's stated mission of helping the disadvantaged, it has loaned millions to its own executives and officers over the years; and its borrowers have delinquency rates seven to ten times higher than their credit union peers. A second article made fewer personal charges but instead criticized Eakes, among others, for "demonizing" the practices of some of the country's leading subprime lenders. In that article, Capital Research lauded Countrywide, New Century, and other subprime lenders for increasing "home ownership opportunities for minorities and low-income borrowers" while ripping "left-wing advocacy groups" like Self-Help that "oppose consumer choice."

In Durham, people didn't know whether to laugh or cry. Capital Research was accusing Eakes of enriching himself at the hands of the poor yet Self-Help's salary cap meant their boss and the other top staff were getting paid no more than $69,000 a year. Still, they earned too much to join the credit union they ran and therefore were ineligible for loans. For his part, Eakes was relieved that the Raleigh News & Observer Raleigh News & Observer had recently named him its 2005 "Tar Heel of the Year." To ensure they hadn't chosen wrong, the paper had a reporter check Capital Research's charges. "It was bad luck for them that the had recently named him its 2005 "Tar Heel of the Year." To ensure they hadn't chosen wrong, the paper had a reporter check Capital Research's charges. "It was bad luck for them that the News & Observer News & Observer had already picked me for this thing," Eakes said. "They had to get to the bottom of this and investigate." Making insider loans and reckless lending "would be worrisome," the had already picked me for this thing," Eakes said. "They had to get to the bottom of this and investigate." Making insider loans and reckless lending "would be worrisome," the News & Observer News & Observer wrote in an editorial appearing shortly after Capital Research's first attack, "if there was a word of truth to them." wrote in an editorial appearing shortly after Capital Research's first attack, "if there was a word of truth to them."

At least one of Capital Research's charges was true: More of Self-Help's borrowers were thirty or sixty days late in their mortgage payments when compared to the typical credit union. But that was to be expected given Self-Help's role as a self-styled bank of last resort. "Our customers don't have the same cushion that middle-cla.s.s borrowers have," Eakes said. "So if they lose a job or someone gets sick, they're more likely to fall behind a month or two. But then they catch up because keeping a home means that much." Through the economic turmoil of 2008, Self-Help, despite its low-income clientele, had consistently maintained a loan default rate of less than 1 percent.

Bonnie Wright, Eakes's wife, believes the attacks on her husband help to sustain him. Longtime Self-Help colleagues say the same, but on some level the a.s.sault on his character seems to bother Eakes. He cracked jokes about some of the more personal charges foes have leveled at him but back at his office, he wanted to read me a quote from Eric Dezenhall, Steven Schlein's boss. It took him less than thirty seconds to find it: "Modern communication isn't about truth, it's about a resonant narrative. The myth about PR is that you will educate and inform people. No. The public wants to be told in a story who to like and who to hate."

"They don't understand idealism," Eakes said of the payday lenders and other businesses aligned against him. "They can't believe idealism exists. So they think, 'You have to be doing this because you want our business.' They have the most cynical motives so they conclude everyone else has cynical motives."

Eakes, Ralph Naderlike in his asceticism, hardly offered a fat target for those looking to tarnish the CRL. The same could not be said of all of its donors, though, starting with its top two funders, Marion and Herb Sandler, former owners of the World Savings Bank in Oakland, California. It was Herb Sandler who had first approached Eakes about starting a group like the Center for Responsible Lending, and the Sandlers proved generous benefactors. Mike Calhoun told me the couple had given the CRL roughly $20 million in its first half dozen years but Herb Sandler said the actual dollar figure was "well over" that amount.

Eakes had never heard of World Savings or the Sandlers when Herb Sandler first phoned him proposing a meeting, but he asked around and liked what he had heard about the couple and their bank. They were stand-up lenders, he was told, who concentrated on writing mortgages for middle-cla.s.s borrowers. They had testified before Congress about sound lending practices and feature articles generally heralded them as humane and socially conscious-old-fashioned bankers succeeding in a modern world. World Savings held on to its loans rather than selling them off on Wall Street. The Sandlers gave generously to the American Civil Liberties Union and Human Rights Watch.

The Sandlers still enjoyed a solid reputation when Wachovia bought Golden West Financial, the parent company of World Savings, for $26 billion in 2006. Their share of the purchase price was a reported $2.3 billion. But then the housing bubble began to deflate and with it the Sandlers' reputation. Wachovia's stock plummeted by nearly 80 percent as reports spread of heavy losses in its mortgage holdings. Wachovia had made its share of irresponsible loans long before merging with World Savings but it was the World Savings portfolio that was blamed, at least initially, for the implosion of this bank that had been founded in 1879. At the peak of the credit crisis, in the fall of 2008, federal regulators pressed Wachovia to sell itself to a more secure partner. Wells Fargo bought Wachovia in October of that year, for $15 billion.

World Savings had specialized in a product called an option ARM. These were adjustable rate mortgages-loans that would see interest rates fluctuate over time-that allowed borrowers to choose how much they would pay each month. The Sandlers dubbed World's product Pick-A-Pay: A customer could make a full monthly payment or they could pay an amount that wouldn't even cover the interest for that month. To the Sandlers, theirs was a more humane product that insulated borrowers from payment shock should there be a spike in interest rates and also gave them the flexibility to ride out financial b.u.mps in the road, whether a lost job, a divorce, or a health-care crisis. The problem with the loan was what bankers call negative amortization: Choose to pay the lower rate and the amount of money you owe rises over time rather than shrinks. Critics dubbed the option ARM and Pick-A-Pay in particular a fundamentally dishonest loan product-essentially an expensive way for people of modest means to rent a home because those always choosing the lesser payment were unlikely to ever have the money to buy the property. The product might make sense when housing prices were soaring-it's a very good deal if you can sell for $400,000 the home you bought for $250,000, even if you paid down little if any of the princ.i.p.al-but a lousy deal when prices fell. Then it only seemed a way of lending to people with little or no regard for their ability to pay. Inside the CRL, they don't seem to have anything good to say about the option ARM. But that wasn't something people internally would talk about on the record. "Our stance," Kathleen Day, CRL's main spokeswoman told me, "is that the Sandlers are perfectly capable of defending themselves." She then added, "We are grateful they have been so generous in their funding of our efforts," and noted that their contributions have never come with any strings attached.

By the time I caught up with Herb Sandler to hear his side of things, he was so fed up with the media that he sputtered more than explained. Time Time magazine put the Sandlers on its list of "25 People to Blame for the Financial Crisis." The magazine put the Sandlers on its list of "25 People to Blame for the Financial Crisis." The New York Times New York Times named them in a front-page article as two of the chief villains behind the economy's collapse. CBS's named them in a front-page article as two of the chief villains behind the economy's collapse. CBS's 60 Minutes 60 Minutes devoted an entire segment to a former World Savings employee who claimed he had repeatedly tried to warn higher-ups about the destructive nature of the loans they were peddling. The Sandlers were even parodied in a mock C-SPAN press conference aired by devoted an entire segment to a former World Savings employee who claimed he had repeatedly tried to warn higher-ups about the destructive nature of the loans they were peddling. The Sandlers were even parodied in a mock C-SPAN press conference aired by Sat.u.r.day Night Live. Sat.u.r.day Night Live. When their turn came to stand at the podium, they were identified on screen as "Herb and Marion Sandler: People who should be shot." When their turn came to stand at the podium, they were identified on screen as "Herb and Marion Sandler: People who should be shot."

Herb Sandler seemed most angry about the article in the New York Times New York Times, which ran on Christmas Day 2008. It wasn't hard to see why. World Savings was an odd choice for anyone looking to single out some of the worst villains of the subprime meltdown. It had not gotten caught up in the securitization frenzy at the heart of the credit collapse. Loans made through World Savings were held on to rather than sold on Wall Street. The Sandlers were pushing adjustable rate mortgages, sure, and they would play a role in the great global recession, but they were not ensnaring people with teaser rates as low as 1 percent annually and then hitting borrowers, two years later, with rates that reset at 6 or 7 or 8 percent. They didn't target minorities or the working poor like many other lenders. World Savings stood as a perfect laboratory for examining how the housing frenzy overtook even seemingly well-meaning businesspeople but instead World-and the Sandlers in particular-was lumped in to listings of the country's more reckless, covetous lenders. Among those delighting in the misfortune of the Sandlers was Steven Schlein, who never seemed to tire of pointing out that the "founders of the Center for Responsible Lending" had been exposed as the "toxic mortgage king and queen."

As if all the negative reports about the Sandlers weren't bad enough for the CRL, another major donor, John Paulson, wore a similarly large target on his back. Paulson was a hedge fund manager who so firmly believed that loose lending standards would cause deep troubles in the broader economy that he bet against the real estate market. Paulson & Co. made $15 billion in profits in 2007, $3.7 billion of which Paulson himself pocketed. That is believed to be the largest one-year payday in Wall Street history. In 2008, his firm collected another $5 billion in profits. In different circ.u.mstances, Allan Jones might have been impressed, but Paulson had donated millions to the CRL, so Jones was disgusted.

"It was un-American what he did," Jones said. "He made his money betting against our country. This is who's funding the CRL." Jones then brought up the Sandlers, who he claimed "started the credit meltdown" when they sold Golden West to Wachovia. "You look at how dirty the CRL is," he said. "And after knowing that, you'd even listen to a word they have to say about us?"

Thirteen.

Past Due COLUMBUS, OHIO, 20022008 Bill Faith didn't mince words when his fellow activists in Dayton asked him at the start of the 2000s about Dean Lovelace's plan to introduce a local law to restrict the city's predatory home lenders. "I told them, 'No offense, but you don't have the capacity, you don't know what you're doing,'" Faith said. The states and the federal governments have agencies in place to monitor lenders, he told them; cities don't. But Faith was also the state's most prominent housing advocate, so when his allies in Dayton moved ahead anyway, he did what he could to help. Faith shrugged when we met in his offices a few blocks from the state capitol in Columbus in the fall of 2008. "I figured if it got attention for the issue, that'd be a good thing," Faith said. The city councils in Cleveland and Toledo would pa.s.s bills similar to Dayton's.

In theory, Ohio was a strong home-rule state that granted munic.i.p.alities broad powers over the regulations inside their borders. In reality, though, the mortgage industry had the cash and the clout to convince the Ohio state legislature, one year after Dayton's legislation, to pa.s.s a law stripping Dayton, Cleveland, and Toledo of the authority to regulate the mortgage lenders operating within their city limits. The boilerplate anti-predatory language its sponsors added to the bill was largely lifted from the 1994 HOEPA statute, and therefore already law, but that didn't prevent Governor Bob Taft, a Republican, from patting himself on the back. This bill, Taft declared when signing the measure into law, proves that in Ohio "we will not tolerate predatory lenders, or loan sharks, who take advantage of senior citizens, people with limited incomes, or people with bad credit histories." More revealing, though, were the reactions of partisans to its pa.s.sage. "We certainly think it's a good bill," said Dayna Baird, the head of the Ohio Consumer Finance a.s.sociation and the chief lobbyist for large lenders such as Household and CitiFinancial. In contrast, Jim McCarthy in Dayton dismissed the new law as a "canard" and Bill Faith dubbed it "the most arrogant bill I've seen in all my years in Columbus.

"There's this subprime problem going on all over the state and what do our legislatures do?" Faith asked. "They pa.s.s a bill that says to the cities, 'We're going to preempt you from doing anything about predatory lending, that's the state's job, but, oh, by the way, we're not going to do anything about the problem." If there was the occasional tale of a borrower harmed by a particularly noxious subprime loan, legislators were told, that was the work of a rogue agent whose misdeeds had been exaggerated by a press corps on the hunt for the sensational. Politicians on both sides of the aisle, it seemed, were inclined to extend the benefit of the doubt to any lender willing to work with borrowers of modest means.

The bill, pa.s.sed during the 2002 legislative session, did create a sixteen-person Predatory Lending Study Committee that would travel the state to a.s.sess the problem. When they hit Dayton, so many people wanted a turn at the microphone that, despite a strict five-minute limit on speeches, the meeting lasted three hours. The committee chairman Chuck Blasdel, a Republican state legislator who had been the primary sponsor of the preemption bill, told the Dayton Daily News Dayton Daily News that he was very moved by some of what he had heard that evening, but he warned against any new laws. Tighten regulations, he said, and watch credit dry up in those communities most in need. A year later, Blasdel's task force made its recommendations but they quietly died in committee. that he was very moved by some of what he had heard that evening, but he warned against any new laws. Tighten regulations, he said, and watch credit dry up in those communities most in need. A year later, Blasdel's task force made its recommendations but they quietly died in committee.

Among his fellow activists, Bill Faith, the executive director of the Columbus-based Coalition on Homelessness and Housing in Ohio, or COHHIO, is celebrated for his ability to get along with legislators on both sides of the aisle. Around the state capital, you're as likely to spot Faith out with a Republican legislator as a Democrat, and over the years he would describe any number of conservative legislators as his friends. Ron Bridges, a lobbyist for AARP, only wishes he could be more like Faith. The AARP was a key ally in the fight against predatory lending and more than once Bridges joined Faith as he tried to work on Blasdel. "I was always two seconds away from wringing the guy's neck because I see all the people getting hurt," Bridges said. "But Bill sees the same thing, which is why he makes sure to get along with guys like Blasdel. He sees the bigger picture." Apparently, though, that means sometimes missing the smaller details. A few years later, Faith and Bridges were on the verge of finally besting the mortgage industry and Bridges looked down to discover that his friend had just spent an hour meeting with the Ohio Senate leadership while wearing two mismatched shoes.

Bill is different than most activists," Mike Toman, a partner in the lobbying firm The Success Group, is explaining to me at his office a block from the state capitol in Columbus. "He knows the inside game." To Toman and his partner, Dan McCarthy, lobbying is best left to the professionals-but Faith is one of those rare social justice crusaders who not only understands how to sell a story to a member of the legislature but also has an innate sense of who to approach and when.

"Most activists want to be right," McCarthy said. "But Bill wants to get things accomplished."

"He's still an activist," Toman said. "He has that pa.s.sion."

"But he understands how to make a deal," McCarthy said.

And then both more or less said in unison: Bill Faith likes to win.

Faith is a beefy man with a bearish physique and white gray hair that seems perpetually unkempt, as if he is suffering from an incurable case of bed-head. He wears a goatee and has a husky, heavy person's voice that can sometimes makes him sound a bit like John Madden. He's a talker, so much so that his friends joke that they don't dare call him unless they know they will be in the car for at least an hour. He smokes, he swears, and he obviously drinks; when we met at the bar at Mitch.e.l.l's, a stylish steak house one block from the capitol, a Ketel One and cranberry c.o.c.ktail appeared in front of him without him needing to ask for it. He wore a sport coat and tie that night, a common occurrence for someone who runs a statewide nonprofit with a multimillion-dollar budget, yet somehow the outfit seemed wrong on him. It might have been the quizzical, boyish way he examined the toast points and goat cheese that accompanied his beet salad (he may be a regular at the bar but he runs a housing advocacy group, and if he eats at Mitch.e.l.l's, it's a rare treat because someone else is picking up the tab); it might have been the informal "How ya doin'?" greeting he gave most everyone, from the retired Senate president having a drink in the bar area to the hostess showing us to our seats.

His mother would drag him to civil rights protests as a kid. His father, a Presbyterian Republican raised in rural Indiana, was unhappy she was bringing their son to places where they were often the only whites in the room aside from the media. His mother was devastated when Martin Luther King, Jr., was a.s.sa.s.sinated. His father considered the civil rights leader a communist who had brought tragedy upon himself. Faith grew up in the People's Republic of Youngstown, a staunchly pro-union town and firmly Democratic, but that's only because his father was a farm implement salesman dispatched to eastern Ohio to grow the market there. "A lot of my relatives still live in rural Indiana and rural Illinois," Faith said. "So I know those people. I can talk to them."

Faith was never much of a student. He dropped out of college at the end of his freshman year, but a year back in Youngstown was all he needed to get serious about his studies. "I didn't want to work in the mills," he said, "but that's exactly where my life was headed." He was accepted into Ohio State in the mid-1970s, where his future started to take shape. He read about the Catholic Worker movement and imagined himself as a social worker. He liked the fit and even converted to Catholicism. "I was looking at this small sliver of the Catholic Church and ignoring the other ninety percent," he said. "The first nun I met wore jeans."

Faith's first job after college was at an inst.i.tution for the mentally ill called Orient, located about thirty miles from Columbus. Orient was a shock to his system. One resident there spent his days chewing his shirt; another, he said, the staff simply tied to a chair. The entire facility reeked from urine. "It's a lot better than it used to be," the facility's superintendent a.s.sured him. After Faith discovered that his immediate boss was stealing money from patients, he began surrept.i.tiously removing incriminating doc.u.ments from work, and eventually a complaint he filed with the state attorney general's office led to the man's removal. Faith left Orient after two years to help open an alternative community for the mentally disabled that he and his fellow idealists called The Ark. Among the residents there was a man with Down syndrome named Richard Wilson, who had lived at Orient for four decades. "He lives in this G.o.dforsaken place for forty years but he loves life," Faith said. "He had no reason to but he had this great att.i.tude. He was a kind of life guru for me."

Faith lived the life of a committed leftist coming of age during the first half of the 1980s. He got involved in the peace and sanctuary movements; he joined the Committee in Solidarity with the People of El Salvador (CISPES). Now on the other side of fifty, he sometimes wonders what his younger self might have been thinking. One time he traveled to Washington to join a group of Catholic workers who had chained themselves to the Pentagon to protest U.S. policy in Central America. It might have felt cathartic to speak truth to power, Faith said, but they had no real strategy other than voicing their collective outrage. On the other hand, he had good things to say about the two weeks he spent in the D.C. city jail on trespa.s.sing charges. "When does a guy like me ever get to see the inside of a place like that?" he asked.

Back in Columbus, Faith got involved with a group trying to feed and house the homeless. While he was working behind the steam table at one of the soup kitchens, a man pulled out a shiv and slashed Faith's face from ear to lip. What most amazed the people who worked with Faith is that, despite the hundred-plus st.i.tches it required to close the wound, he took his regular turn serving just days later. Faith said he was fine with it ("Maybe he just wasn't on his medications that day," Faith had told the Cleveland Plain Dealer Cleveland Plain Dealer when that paper profiled him as its man of the year in 2003) until the guy tracked him down years later to offer an apology. "I kinda had a fantasy vision of shooting him between the eyes," Faith said. when that paper profiled him as its man of the year in 2003) until the guy tracked him down years later to offer an apology. "I kinda had a fantasy vision of shooting him between the eyes," Faith said.

When Greg Haas thinks of his friend back then, he imagines him wearing denim-a denim jacket, a denim shirt, and of course jeans. Faith favored sandals and wore his hair in a fierce bush of curls. The two met when Faith was helping to organize a series of protests at city hall aimed at establishing shelters for the homeless around Columbus and Haas was running the mayoral campaign of an old-school social services Democrat. Faith might have looked like every other protester, Haas said, but even then he stood out from the crowd. "Rather than humiliate people, or just hit them in the face with an issue, Bill seemed to be someone searching for a solution," he said. It was Faith, Haas said, who hammered out a compromise with the city's social services director-find a community willing to take a shelter, the agency head said, and we'll provide the funding-and Faith, after calling what seemed like every landlord and bureaucrat in town, made it happen.

That fight was winding down when Faith was offered a job running the Coalition on Homelessness and Housing in Ohio. He moved out of the Ark and started wearing a tie to meetings, and eventually added a sport coat to his wardrobe. He focused on affordable housing and the homeless through most of the 1990s but by the end of the decade he started talking about predatory lending as well. He thought he had a simple and elegant solution to the problem: Simply apply the state's existing consumer protection laws to the mortgage business. How could it be, he asked, that Ohio protects its citizens from getting ripped off when they plunk down $25 for a toaster but not when they sign papers committing themselves to an $80,000 loan?

Faith shifted strategy after the 2002 legislative session. If the legislature refused to intervene, Faith said, he would "pound the issue in the court of public opinion" until elected officials relented. He began contacting reporters he knew, hoping to get them interested in the issue. He offered the same message to each: The poverty industry is far more pervasive than you think. "I kept telling them, 'Don't talk about black folks,'" Faith said. "There are these loan sharks in the suburbs. There are loan sharks in the town squares of rural areas."

While he was working the phone, he learned that two reporters at the Columbus Dispatch Columbus Dispatch, Jill Riepenhoff and Geoff Dutton, were already starting to look at the dramatic spike in foreclosures in the Columbus area. He might have made a pest of himself during the nine months he worked with the pair on their series but it seemed well worth it. The resulting series, "Brokered Dreams," published in September 2005, seemed to have exactly the kind of impact Faith was hoping for. "All of Columbus read it," AARP lobbyist Ron Bridges said of the Dispatch Dispatch series. "Or at least all of political Columbus read it." Bridges, who is black, grumbled that it wasn't until a series of articles showed that the problem had spread to the white suburbs and rural areas that the legislature felt it needed to act, but when I visited him in his office several years later he still had a small stack of reprints right behind his desk. series. "Or at least all of political Columbus read it." Bridges, who is black, grumbled that it wasn't until a series of articles showed that the problem had spread to the white suburbs and rural areas that the legislature felt it needed to act, but when I visited him in his office several years later he still had a small stack of reprints right behind his desk.

The two reporters didn't completely ignore the center of town, of course. Dutton's "Flipping Frenzy" piece revealed how wealthy investors with money in a New Yorkbased hedge fund called Stillwater Capital Partners profited from subprime in Columbus, and that kept him running around some of Columbus's poorer neighborhoods in search of vacant properties and the "straw buyers" whose names and signatures were needed to bid up the prices of these boarded-up messes. But the shock in the series was its finding that foreclosure filings had risen faster in the state's suburban and rural counties than in urban ones. "Foreclosures were predictably concentrated in poor, inner-city neighborhoods," Dutton wrote. "But, surprisingly, cl.u.s.ters of dots circled the outskirts of the city, in the newest subdivisions of suburbia." Even a small Amish community in the northeastern corner of the state felt so under siege that the county posted public service billboards on the more popular horse-and-buggy routes. "You can be robbed when you are away from home," the signs read, "or you can be robbed over pie and coffee. Be skeptical of door-to-door mortgage salesmen."

In her reporting, Riepenhoff focused on a single subdivision on the city's far western suburbs, called Galloway Ridge. It had been developed by Dominion Homes, a publicly traded real estate development company that built subdivisions in central Ohio and Kentucky. Galloway Ridge was a relatively new development but one in six homes were already in foreclosure or part of a bankruptcy proceeding. When Riepenhoff asked the executives at Dominion for an explanation, they blamed it on the irresponsibility of their buyers. "These people are not of the same credit quality, the same earnings level, the same understanding of credit as people in other parts of town," company CEO Douglas G. Borror told the Dispatch. Dispatch.

However, the credit counselors, bankers, appraisers, and others in the real estate industry appearing in Riepenhoff's article offered an alternative explanation for the high rate of foreclosures: a lack of checks and balances in the company's sales transactions. Five years earlier, Dominion had created a new division, Dominion Homes Financial Services, to act as a mortgage broker for those looking to buy any of the properties they built. That meant a single company was constructing the homes, setting the prices, and playing a large role in establishing the loan terms. Dominion even went one step further by helping those without any money raise a down payment-or, as Riepenhoff wrote, the home builder "found a way around a federal law barring sellers from giving money directly to buyers for a down payment."

A California-based nonprofit called the Nehemiah Corporation of America was the key. Dominion would send a prospective buyer to Nehemiah, which would send Dominion borrowers the 3 percent down payment required to qualify for a loan through the Federal Housing Administration (FHA). Then, within a few days, Dominion would donate that amount of money to Nehemiah, plus a service fee. (For years HUD, which oversees the FHA, has tried to block this practice but the agency had never prevailed in the courts.) What was the harm if a sizable corporation wanted to devote a portion of its profits to helping people of modest means raise a down payment for a house? For one thing, it wasn't a gift; Dominion officials admitted to Riepenhoff that they simply pa.s.sed along the cost of the down payment to the buyer, just as it would the cost of a specially ordered stove. Moreover, there were risk-management studies that led the government to impose the 3 percent requirement in the first place. A 2002 HUD study of Nehemiah-a.s.sisted loans in four cities found default rates higher than 19 percent. At 11.5 percent, the Dominion default rate was much lower but it was still twice as high as the Ohio average and more than two and a half times the national average.

The paper found that Ohio's mortgage default rate had reached nearly 6 percent-tops in the country in 2005. The surge had started in 1999, shortly before Faith and the people in Dayton began clamoring for someone in power to act. That year there had been 31,000 new foreclosure filings in Ohio but by 2005 there would be more than twice that number: 64,000. The list of culprits the Dispatch Dispatch series singled out was long and included mortgage brokers who put borrowers in loans they could not afford and unscrupulous appraisers inflating the worth of a property. The series also included a chart of Ohio's ten largest subprime lenders, a roster that included Countrywide, H&R Block, Citigroup, and Wells Fargo. "I think a lot of Columbus was in shock while that series was running," Ron Bridges said. series singled out was long and included mortgage brokers who put borrowers in loans they could not afford and unscrupulous appraisers inflating the worth of a property. The series also included a chart of Ohio's ten largest subprime lenders, a roster that included Countrywide, H&R Block, Citigroup, and Wells Fargo. "I think a lot of Columbus was in shock while that series was running," Ron Bridges said.

People inside the Dispatch Dispatch weren't the only ones to notice this creeping menace, of course. Almost as soon as she took office in 2004, Joy Padgett, a state senator representing a predominantly rural district in central Ohio, began to hear from residents worried they were going to lose their home after refinancing with an unscrupulous lender. "At first, I thought they might just be isolated incidents," Padgett said, but the consistency of the calls and the volume convinced her otherwise. Researching the law, she discovered the same loopholes that others had spotted years earlier. At the start of 2006, she introduced the Homebuyers Protection Act, which would broaden the state's consumer protections laws so that they covered mortgage brokers, loan officers, and nonbank lending inst.i.tutions. The bill also empowered the attorney general's office to prosecute appraisal inflation and other practices that are often part of mortgage fraud. Padgett was a Republican representing a conservative district, but Faith, the left-leaning homeless advocate, finally had his champion. "She ended up becoming a good friend," Faith said. weren't the only ones to notice this creeping menace, of course. Almost as soon as she took office in 2004, Joy Padgett, a state senator representing a predominantly rural district in central Ohio, began to hear from residents worried they were going to lose their home after refinancing with an unscrupulous lender. "At first, I thought they might just be isolated incidents," Padgett said, but the consistency of the calls and the volume convinced her otherwise. Researching the law, she discovered the same loopholes that others had spotted years earlier. At the start of 2006, she introduced the Homebuyers Protection Act, which would broaden the state's consumer protections laws so that they covered mortgage brokers, loan officers, and nonbank lending inst.i.tutions. The bill also empowered the attorney general's office to prosecute appraisal inflation and other practices that are often part of mortgage fraud. Padgett was a Republican representing a conservative district, but Faith, the left-leaning homeless advocate, finally had his champion. "She ended up becoming a good friend," Faith said.

As 2005 was turning into 2006, Bill Faith was missing a key component in the narrative he was trying to construct. Martin Eakes and his allies had Freddie Rogers, the widower and single parent who drove a bus for the Durham public schools. Bill Brennan and Howard Rothbloom put forward several older women whose plight came to serve as the public face of predatory lending in Atlanta at the start of the 1990s. Bill Faith had a raft of sobering statistics on his side and an ominous sense of a pending crisis, but it wasn't until a lawyer named Rachel Robinson at the Equal Justice Foundation told him about Martha and Larry Clay that he found those Faith dubbed "predatory lending's poster couple."

The Clays, who lived in a white working-cla.s.s neighborhood in Columbus that locals call the Bottoms, were both blind. Their home had cost $15,000 when they purchased it in the mid-1980s. Larry Clay had worked as an X-ray technician at a nearby hospital for thirty-nine years but that facility closed its doors in 2002 when he was in his mid-sixties. After that the couple lived on a monthly $1,700 disability check. They attended services at a nearby church, where Larry Clay sang several times a week and volunteered at its soup kitchen. Martha Clay had recently survived ovarian cancer. By the time Bill Faith learned these and other facts about the Clays, they had been talked into so many refinancings that the couple owed $80,000 on a home the county a.s.sessor claimed was worth only $37,000, and they were facing eviction. The closing costs and broker's fees on the last four refinancings alone added up to $20,000. As Martha Clay described it, they had been paying 7 percent interest on a $72,000 home loan but then the same mortgage broker who had put them in that loan only eight months earlier told them he could get them a better rate. But then the Clays ended up signing papers on an $80,000 loan carrying a 10 percent interest rate. So whereas the couple had been paying $480 a month on their home prior to that final refinancing, their new monthly bill was $702. For his troubles, the mortgage broker paid himself a $3,200 fee.

"Both blind, from a poor white neighborhood in Columbus, scammed into mortgages six different times," Faith said. "Good religious people. He sings in the choir. I mean, she's got cancer and they're doing this to her." Faith couldn't suppress the sly grin tugging at the corner of his lips. Despite the great sympathy he felt for the Clays, he's a political pragmatist who recognizes an opportunity when it is presented to him. "A legislator can argue with me," he said. "But what are they going to say to the Clays? 'You should have known better?' 'You should've read the doc.u.ments closer?'" The Dispatch Dispatch told the Clays' story in a page-one article that appeared on a Sunday in February 2005, and Faith arranged it so the couple testified in both the Ohio House and Senate when it came time for the appropriate committees to debate Joy Padgett's bill. told the Clays' story in a page-one article that appeared on a Sunday in February 2005, and Faith arranged it so the couple testified in both the Ohio House and Senate when it came time for the appropriate committees to debate Joy Padgett's bill.

The Republican leadership proved critical to its pa.s.sage. It helped that Faith had a good working relationship with both Bill Harris, the president of the senate, and his top lieutenant, Jeff Jacobson. Both Harris and Jacobson had sided with the industry in 2002 (the Ohio a.s.sociation of Mortgage Bankers gave Harris its "Legislator of the Year" award that year) yet both joined the reform side in 2006. "I think they recognized that what they were hearing from all these mortgage guys was a bunch of crock," Faith said. Perhaps, but Ron Bridges was inclined to give Faith some credit for helping to nudge them along. Bridges joined Faith when he visited Jacobson, who represented the Dayton suburbs, to talk about Padgett's bill. "Do you want your mother, because she walks into the wrong door on High Street, you want her to lose her home?" Faith asked him. Not for a moment did Bridges think this powerful senator's mom might find herself in that predicament, but it didn't matter. "He got that this was about protecting people's mothers from falling prey to these people," he said of Jacobson. So strongly did Harris and Jacobson b