Subprime Loans and Predatory Lenders

Discussion in 'Politics' started by HazelGod, Jun 8, 2009.

  1. HazelGod

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    I recall there being some contentions that the notion of "predatory lending" was fabricated nonsense.

    Affidavits by insiders from Wells Fargo's subprime loan department say otherwise.

    As if this wasn't bad enough, the blatant racism running through the entire division is disgusting.
     
    #1 HazelGod, Jun 8, 2009
    Last edited: Jun 8, 2009
  2. sparky11point5

    sparky11point5 New Member

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    Good find HG.

    I have always contended that the answer to who was responsible for the subprime mortgage debacle was to 'follow the money'.

    If a borrower lied about their income or bought a house that was too expensive they got a *debt* that was too large. If this eventually went to a foreclosure, this borrow at best lost any principal and at worst went bankrupt.

    If a bank facilitated or sought these loans, they made millions in origination fees and gains from re-selling the securitized mortgages.

    Wells Fargo is one example, but there are a score of other examples. The banks made these loans because it was *profitable* until the bubble burst.
     
  3. SpeedoGuy

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    Read about this elsewhere.

    It'll be interesting to see if:

    * The allegations of the WF loan officers are demonstrated to be true.
    * Such lending practices were widespread elsewhere in the mortgage industry.
     
  4. Bbucko

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    No! No! No! You've all got it all wrong!

    It was unqualified, lying minority borrowers who swamped the economy: the same group that passed Prop 8! It's all their faults!
     
  5. lucky8

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  6. B_starinvestor

    B_starinvestor New Member

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    I didn't see a date indicating when this activity occurred, but there are a few questionable statements in the article.

    First, why would anyone that has a W-2 simply 'not want to document income?'

    That's ridiculous. Someone actually wants a higher rate? This is a fabrication pure and simple.

    Second, I'm wondering how someone 'cut and pasted' credit reports. For years credit reports have been downloaded directly from the credit bureaus directly into the underwriting engines of the lenders. The days of faxing in a hardcopy credit report have long since passed.

    Cutting and pasting may have been possible in the late nineties, possibly '01 or '02, but not in the last five or six years.

    I'm not suggesting predatory lending did not occur, but the source/article presented here cites poor examples.

    More predatory behavior was churning mortgages and refinancing time after time with huge fees attached to each refinance (while property values were escalating.)

    What is most likely presented in the attached articles are a couple of LO's that got busted for fraud, and they rolled over and made up some bullshit that the prosecutors likely wanted to hear in return for a reduced sentence or plea bargain.
     
  7. lucky8

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    Star, I believe the issue is they presented their W2's, and later, a loan officer went in and changed it so they could mark them down for a subprime loan. Shit, Countrywide was flat out changing (increasing) the income amounts that borrowers stated in order to make them qualify for a higher loan amount. The shit people at Countrywide were doing had to have been ordered from the top being that so many of its employees across the country were doing it. Too bad we don't publicly lynch people anymore...
     
  8. B_VinylBoy

    B_VinylBoy New Member

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    Those damn lazy, predatory borrowers! Always begging for money! What was banks to do except to actually GIVE IT TO THEM? :biggrin1:
     
  9. D_Martin van Burden

    D_Martin van Burden Account Disabled

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    When I was in undergraduate school, I studied predatory lending activity in Lexington through the city's Human Rights Commission. This was around the same time cited in the affidavits in the NYT article, and the numbers were rather sad. Suffice to say, black borrowers had to claim income and collateral at least 1.5 times to twice as high as their white counterparts controlling for education and age in order to secure as favorable a mortgage rate.

    The practice is abhorrent enough; seeing that derogatory language really just sent me over the top. "Mud people," "ghetto loans." You have to wonder how high of higher-ups issued the orders. These loan sharks weren't acting in a clandestine fashion. They were told what to do. If Wells Fargo is proven at fault in the eventual lawsuit, I say the government should refuse to give assistance to this bank and let it fall apart.
     
  10. tripod

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    Star... the article is not an opinion piece... it contains the affidavits of two of Wells Fargo's top loan officers.

    Are you so delusional as to think that their affidavits are false? Don't stick your head in the sand on this one Star... think it over.
     
  11. B_starinvestor

    B_starinvestor New Member

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    I think the affidavids contain statements that are bogus.

    The OP's link said this, "Some officers told the underwriting department that their clients, even those with good credit scores, had not wanted to provide income documentation.

    "By doing this, the loan flipped from prime to subprime. But there was no need for that; many of these clients had W2 forms."


    This is ridiculous. If you had a job, came to the bank and said 'get me a loan. I have a W-2 but I'm not showing it to you.' -- then of course you are going to get a subprime loan. You have NO REASON not to turn over your W-2. If you don't verify your income, you are not getting a conventional loan; regardless of skin color.

    Secondly, the cut/paste of a credit report was something you could do ten years ago, but not in recent history. Credit scores have been pulled directly from the three bureaus and downloaded into lender underwriting programs.

    That said, I know that there was predatory lending activity.

    The examples noted in the OP were either lies, or told by somebody that didn't work in the mortgage industry, or somebody that worked in the industry but wasn't at all familiar with the underwriting system or income verification process.
     
  12. tripod

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    Star... the affidavits are from two of Wells Fargo's TOP loan officers.

    The statements were given while under oath and were given under the penalty of perjury, fine, or imprisonment.

    You are deliberately ignoring the facts and your statement above is absolutely wrong on all accounts.
     
  13. D_Martin van Burden

    D_Martin van Burden Account Disabled

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    I don't think that's quite right. Read it again. The officers said that the clients did not want to provide income documentation. The second bit reads that many clients actually did bring income information, even though the officers scrubbed it from the record. So, the officers are deceiving the clients. The problem, then, is for the bulk of minority clients who brought in verifiable income that might have enabled them to secure a much more competitive and favorable interest rate, only to get shuttled into a subprime rate through deceptive practices.
     
  14. B_starinvestor

    B_starinvestor New Member

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    I'm telling you, they could not have been top loan officers. The statements don't make sense.

    their description of the credit reports is nothing short of comical.

    If they did indeed commit mortgage fraud, they would have no problem with perjury.

    Their statements are similar to somebody telling you a major league baseball game is 7 innings.

    they got the word 'innings' right; but thats all they know about baseball.

    That's all I'm sayin. I owned a mortgage company for 11 years. I'm telling you their statements don't make sense.
     
  15. B_VinylBoy

    B_VinylBoy New Member

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    Let's see... Two top loan officials from Wells Fargo, or a hyper-conservative forum nuisance who posts 5-10 anti-Government threads a week who "owned a mortgage company". Who can we trust?

    Even my Magic 8 Ball is laughing at this question...
     
  16. sparky11point5

    sparky11point5 New Member

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    Ah, sweet mockery, you make life worth living!

     
  17. sparky11point5

    sparky11point5 New Member

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    Star --

    If the borrowers did not want to provide income verification, there are several reasons.
    -- They were buying a house that their real income did not support.
    -- They are commissioned sales or other professionals.
    -- They were lazy (don't discount this)

    The reason why this might be ok to many, was that a subprime loan was cheaper, particularly with the teaser rates many originators offered.

    If the originators falsely flipped the mortgage to subprime, it was likely that they were strongly encouraged to do so by their employers through bonuses or other compensation. An earlier WSJ article talked about this.

    I think this is not that hard to think through, Star,

     
  18. B_starinvestor

    B_starinvestor New Member

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    I disagree.

    Again, this line from the article in the OP:

    But there was no need for that; many of these clients had W2 forms."

    I don't dispute the three reasons you cited for not disclosing income. I dispute that fact that the L.O. suggests, above, there there was no reason for that.

    They are inferring that the loan could have been originated as conventional, but the LO's just 'flipped it' to subprime because the borrowers didn't want to disclose the W-2.

    If that is indeed the case, then the borrowers KNEW THEY DIDN'T QUALIFY FOR CONVENTIONAL FINANCING WITH THEIR INCOME. a la, they had a hand in the deception as well.

    Also, you are reaching if you suggest that the teaser rates on subprime were better than conventional rates.

    No way. Never.

    If you wanted a low rate, you could go with a 1 or 3 year conventional arm, which would always beat anything in the subprime industry.

    If you are looking for a low rate -- and you qualified for conventional financing -- the absolute only reason you would jump to subprime would be to buy a home that you couldn't afford.

    Look, I know there were snakes in the mortgage industry...I'm just saying these LO's from Wells Fargo are selling a story and I'm not buying.
     
  19. midlifebear

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    Star: You spend so much time splitting hairs inquiring minds want to know if you have any hair left?

    Two+ years ago while breezing through my favorite County on I-80 I stopped into the local Wells Fargo and talked with their one and only mortgage lender about financing on a duplex that I could purchase for $275,000. The the loan officer had copies of my W2 forms faxed to him from my CPA a whole half block away. He noted, "Oh, you're self-employed." I asked him what's wrong with being self-employed. "Well," he explained, "You really don't qualify under FreddiMaC for a loan, even if you're willing to pony up 50% of the total costs as a down payment. You see, a duplex is considered unsecured income property." His suggestion was to drive to Reno and talk with Schwab and see if they could issue me a loan for $150,000 on a pseudo commercial pieces of property under FanniMae.

    "However," the loan officer was quick to mention, "If you're looking for a single family dwelling I can qualify you for a $700,000 mortgage right now? Would you be interested?" I told him I was not interested and thanked him for his time.

    I made a low-ball offer on the duplex, which was accepted. And after 30 days of escrow the property was mine: all bought and paid for. But if I had wanted, Wells Fargo would have granted me a $700,000 mortgage on a single family dwelling? Something was definitely wrong. And it was that same week that Fannie and Freddi hit the wall of the economic news like bad a ton of fresh bat guano.

    And that, little Star, is NOT anecdotal.
     
  20. B_starinvestor

    B_starinvestor New Member

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    Well, that guy was liar if he said fannie/freddie don't have programs for investment property (up to 4 units). You said 'duplex' which is a fairly popular fannie loan. The only thing that wouldn't qualify would be if it were mixed use - such as a storefront.

    So the guy was either stupid or a liar. And 'unsecured income property' is a blatent lie, too.

    BTW, if you are self-employed, why are you issuing yourself a W-2?
     
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