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Inside the Countrywide Lending Spree - New York Times

Tags: countrywide, subprime on 2007-12-04 -All Annotations (0) -About

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Ameriquest Mulit-State Settlement

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FRB: Testimony--Bernanke, Subprime mortgage lending and mitigating foreclosures--September 20, 2007

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more fromwww.federalreserve.gov

sell many mortgages to various intermediaries, or "securitizers." The securitizers in turn pooled large numbers of mortgages and sold the rights to the resulting cash flows to investors, often as components of structured securities.
The fraction of subprime ARMs past due ninety days or more or in foreclosure reached nearly 15 percent in July
About 320,000 foreclosures were initiated in each of the first two quarters of this year (just more than half of them on subprime mortgages),
Adjustable-rate subprime mortgages originated in late 2005 and in 2006 have performed the worst, with some of them defaulting after only one or two payments (or even no payment at all).
The originate-to-distribute model seems to have contributed to the loosening of underwriting standards in 2005 and 2006. When an originator sells a mortgage and its servicing rights, depending on the terms of the sale, much or all of the risks are passed on to the loan purchaser. Thus, originators who sell loans may have less incentive to undertake careful underwriting than if they kept the loans. Moreover, for some originators, fees tied to loan volume made loan sales a higher priority than loan quality.

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Local News | Homeowners in debt, seniors prime targets of riskiest loans | Seattle Times Newspaper

Tags: elderly, predatory, subprime, targeting on 2007-12-03 -All Annotations (0) -About

more fromseattletimes.nwsource.com

2.2 million subprime borrowers expected to lose their homes by the end of next year.
Some loans were more predatory than subprime, with features so onerous that borrowers refinanced their way out of the American dream, losing their houses — and substantial equity — to mortgages they never stood a chance of repaying
Targeting homeowners for mortgages based solely on the financial stake they have in their homes is universally regarded as predatory lending and is illegal under state and federal laws
growing evidence that many borrowers are being sold products that strip, not build, equity and household wealth."
predatory-lending allegations against the company. Last year, Ameriquest paid $325 million to 49 states to settle the allegations but admitted no wrongdoing.
Defendants certainly knew that they were fraudulently inducing an elderly woman into obtaining mortgage loans that were not in her best interest, and which would only result in a significant profit for them, while it was certain that Mrs. White would lose her home," the lawsuit states.
Mass Marketing Solutions help lenders find potential subprime customers by searching through financial information compiled by the nation's three largest credit-reporting agencies. They look for homeowners who have equity, low credit scores, large debts and recent subprime mortgages. They can pair that information with other consumer data to find people who might have
prepayment penalty" that would cost them thousands if they paid off the loan or refinanced generally within three years. The interest rates on the loans adjusted upward at two years.

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Bloomberg.com: Worldwide

Tags: consequences, mayors, revenue, subprime, tax on 2007-12-03 -All Annotations (0) -About

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Some subprime woes linked to hodgepodge of regulators - USATODAY.com

Tags: consequences, history, origins, subprime on 2007-12-02 -All Annotations (0) -About

more fromwww.usatoday.com

• 20 states have no testing or continuing education requirements for mortgage brokers or lenders.

• 19 states don't do background checks of loan officers and executives to screen for fraud and other crimes.

• Only about half the states have adopted federal guidelines issued last September to curb the use of the riskiest and most exotic mortgages, such as the one Sobel got.

• Only 25 have laws against predatory lending. This involves selling high-cost loans that are plainly unsuitable for a person's financial resources and prospects.
But some lenders, such as New Century and Ameriquest, are a different breed. Because they don't accept consumer deposits, they fall under state supervision. These lenders often rely on independent brokers, who work on commission, to bring in customers. The states also regulate these brokers, sometimes via different agencies. In California, for instance, mortgage lenders answer to the Department of Corporations; mortgage brokers report to the Department of Real Estate.
After the Internet stock crash of 2000, Main Street investors sought financial refuge in solid assets with four walls and a roof. The real estate boom was born. The Federal Reserve helped fuel the frenzy with repeated interest rate cuts. Those rate cuts made home buying more affordable and turned real estate into a highly attractive investment.
As home prices soared, some lenders got reckless with their loan standards and quality control, confident that if a borrower got into trouble, he or she could easily refinance or sell the property. Lenders began offering loans with easy pay options to risky borrowers, such as low-income families with poor credit and no-money-down speculators.
Last year, 20% of borrowers got subprime adjustable-rate loans. These loans start with low "teaser" rates, which increase after two years or so.
And for half of all loan applications, borrowers provided little proof of their income for what have become known in the industry as "liar loans," according to Credit Suisse.
The threat is not only to subprime lenders, but also to the broader economy. Some 2 million homeowners could lose their homes through foreclosure by the end of this year because they can't afford their rising loan payments and can't refinance, according to the Center for Responsible Lending. Lenders who repossess homes are often aggressive about selling them. That means the supply of homes goes up, and neighborhood prices go down. At the same time, prospective buyers may not be able to qualify for a loan because lenders are raising their standards and cutting back on the subprime loans they offer.
It took federal bank regulators nine months to issue underwriting guidelines to curtail "exotic" adjustable loans; only half the states have adopted those guidelines.