Donation to Self-Help affiliate questioned

April 1, 2008

DURHAM, N.C. - A group that advocates against predatory lending is being questioned about a multi-million-dollar donation it received, the Triangle Business Journal reported in its March 21-27 issue.

The Center for Responsible Lending, an offspring of the Self-Help Credit Union in Durham, received $15 million from John Paulson, who owns Paulson & Co. in New York.

The company has made billions of dollars by short-selling subprime mortgage-backed securities, a practice that bets the price of the securities will fall.

The donation is of interest to some in light of the center's efforts to change a bankruptcy law to allow judges to lower the value of first-time mortgages that are in settlements being heard by the judges.

Such a ruling would benefit consumers who have these mortgages mortgages, but would hurt the lenders that hold them, possibly causing mortgage-backed securities to fall.

That could benefit Paulson's company, which, by selling such securities short, has bet their value will decrease.

U.S. Rep. Patrick McHenry of Gaston County, N.C., has asked the House Financial Services Committee to look into the relationship, the Business Journal says, particularly whether the center may have "manipulated the financial markets through changes in pubic policy."

The center says there is no relationship between the donation and the center's work to change lending policies.

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