"Ill., Calif. Investigating Countrywide" on subprime loans. 'bout time!

[in_cog_ni_to]

Ill., Calif. Investigating Countrywide
By ALEX VEIGA, AP Business Writer
6 HOURS AGO

LOS ANGELES - Attorneys general in California and Illinois are investigating the lending practices of Countrywide Financial Corp., the nation's largest mortgage lender..

The Illinois attorney general launched a probe into the lender's business practices and may expand the investigation to examine how homeowners were approved for mortgages with payments they were unable to afford.

"We're looking at why people who appear to us to not be able to afford the loans they're in are in these loans and how Countrywide contributed to that," said Deborah Hagan, chief of the attorney general's consumer protection division, on Thursday.

A California probe is also under way, a state official familiar with the attorney general's investigation into mortgage lending practices said late Thursday on condition of anonymity, citing the confidential nature of the investigation.

In a statement, the Calabasas-based company said it was cooperating with Illinois' investigation and declined further comment. A spokesman didn't immediately return an after-hours call inquiring about the California probe.

The company told the Los Angeles Times it had received subpoenas from both states' attorneys general and that it was cooperating with the investigations.

Countrywide, like many in the mortgage industry, has suffered under the weight of the subprime fallout as thousands of customers default on home loans.

Defaults and subsequent foreclosures have been most pronounced on adjustable-rate mortgages made to borrowers with past credit problems.

The subprime loans typically require a lower monthly payment in the first two or three years before resetting to far higher amounts.<snip>

http://finance.comcast.net/www/news.html?x=http://www.c...

[Zywiec]

1. Homeowners were approved for mortgages with payments they were unable to afford

Am I the only one who keeps a budget?

I know how much comes in, and I know how much goes out.

If X is coming in every month, but X + $200 is needed for my bills, I know there is a problem.

[Gormy Cuss]

2. But it's all the fault of those greedy and stupid home buyers, isn't it.

"Countrywide, like many in the mortgage industry, has suffered under the weight of the subprime fallout as thousands of customers default on home loans." --ah, no. Here's a more accurate description:

"Countrywide customers, like many others duped by the mortgage industry, are suffering under the weight of the subprime fallout caused by the dubious and sometimes fraudulent lending practices pervasive in the industry."

[dbackjon]

4. It still takes two to tango

The homebuyers didn't check out their own budgets. Many thought that if push came to shove, they could just flip the house or refinance with all the new equity they were anticipating.

No sympathy for either side. Both are getting what they signed up for.

[Gormy Cuss]

5. Many of the homeowners did check their budgets and were duped.

The worst they are culpable for is assuming that a lender wouldn't offer more mortgage than they could afford. Those are the typical subprimers defaulting and I have sympathy for all of them.
The flippers were more likely to use the Alt-A's and other products like zero-down ARMs with full awareness that it was a gamble. The owner-occupied homes with suprime loans in foreclosure are heavily clustered in lower and moderate income neighborhoods and disproportionately in minority and immigrant neighborhoods.

However, that's not the core issue. My point was that the quote in the OP article was wringing hands for poor Countrywide and placing the blame on the defaulters.

[Zywiec]

6. Assuming that a lender wouldn't offer more mortgage than they could afford?

Wouldn't you know what you can afford more than someone else?

What kind of budget were they checking where they were duped?

"I know you only make $2000 a month, but certainly you can afford a $2400 a month mortgage."

"Oh, OK"

[Gormy Cuss]

7. Do you actually believe that anyone ever said that?

What's more likely is that a)the lender said you can afford this because it's 50% of your income and in a few years the house will be worth so much more that you can refinance based on the equity or b)the mortgage broker used a stated income vehicle and inflated the household income to meet the criteria or 3)the borrower inflated income on a stated income application and committed fraud, therefore isn't surprised that the house is unaffordable.

[Zywiec]

9. I've never had anything but a fixed rate mortgage

and I'm on my fourth house in the last 20+ years.

I always knew what my payment would be, and what I could afford. If I took a loan that was 50% of my income, I did so knowing full well I would not be doing much other than living in my house and paying bills.

Everyone wants to live in a huge McMansion and feels entitled to it, regardless of whether they have the money.

Whose fault is it that this country has a record high level of credit card debt? Is that also the fault of the credit card companies?

People need to live within their means, even if that is not how they would like to live.

[Gormy Cuss]

14. I've never had anything but a fixed rate either. So we're conservative about the debt.

That also means that there was at least available property for us to buy when we were looking to finance that way.I have a fixed rate for two reasons: I qualified and it's the easy one to understand. I probably could have save a bucket load of money by using a zero-down ARM and investing my downpayment rather than sinking it into the house, but that's outside of my comfort zone.

I agree that credit card debt is no way to live either, but the subprime loan problem is a far different animal. Mortgage products these days are so complex that the average consumer has difficulty understanding which is best for their own circumstances. They're also sold by brokers, not lenders, and all the broker needs to worry about is selling the products that offer the best immediate commission. They're gone once the papers are signed.

See here for a discussion of this: http://www.jchs.harvard.edu/media/understanding_mortgag...

[Zywiec]

16. I am conservative about debt

I didn't just move straight into a house. My wife and I moved from my parent's house into a small apartment. Only after saving enough for a down-payment on a small townhouse were we able to move into a house. No one wants to do that anymore and is always looking for a short-cut.

I know home ownership is the American dream, but that doesn't mean everyone can own a house.

[dbackjon]

8. As I said, both are to blame

And while the first wave of foreclosures are in the lower wealth areas (as would be expected - a they are the first to be hit by ANY economic downturn), the next waves will be in the middle to upper-middle class areas.


Lots of 2500-3000 square foot houses will be in foreclosure soon.

[gratuitous]

10. Not just duped, extorted

Yes, some buyers were speculators and took it in the shorts. That's why these investments were high risk. But quite a number of buyers were first-time homeowners, who were getting as close as many of them would ever get to buying and owning their own home. According to the Wall Street Journal and Paul Krugman's column, some 55% of subprime borrowers were eligible for more conventional loans, and didn't need to have these gimmicks foisted upon them. But for some reason, these sophisticated buyers didn't know enough to shop around for a lender who would write them a conventional loan.

When a buyer is getting down to the short strokes of finalizing his home loan, and if it falls through he's lost the house he's been planning for, he'll sign practically anything, worried that the purchase is going to go sour. How strange that lenders would press an expensive, inappropriate instrument on a buyer just because it will put more money in the lender's pocket, no?

The bursting of the housing bubble is merely the latest development, a development that a lot of people saw coming as inevitable. But along the lines of "They say it will kill me, but they won't say when," nobody really knew just when the bubble would burst. Instead, it kept growing and growing, and even starter homes were getting beyond the means of most middle class people. The bubble, of course, required predatory lenders and greedy or gullible buyers. The greedheads knew or should have known that they were on a high-wire balancing act. But a lot of people were just trying to buy a home, and now they're not only losing that, they get the added bonus of being lumped in with the greedheads on both sides of the mortgage mess.

I used to think progressives and liberals were a little more discerning, but it appears that blaming the victim (and it's easy to see who the victims are - they're the ones who are paying out a lot of money without realizing any security) is a phenomenon that cuts across political lines.

[Zywiec]

11. It appears that blaming the victim is a phenomenon that cuts across political lines

The alternative is no one is ever responsible for anything that happens in their lives.

[gratuitous]

12. Well yes indeedy

Let's by all means get after those first-time buyers who are holding overpriced properties and ruinous mortgages, foisted upon them by operators like Countrywide and others, who wrote risky investments for families who qualified for conventional loans. Kick them fuckers again for losing their investments, their homes, their money and their credit ratings. They should have known, by all means, that they weren't getting a loan on the most favorable terms available for properties that had been churned far above their market value through speculator chicanery.

Let's be 100% sure they're not just ruined, but humiliated to the last inch, the last farthing, and the furthest reach of public approbation that can be measured out to them. Otherwise, how will they ever learn responsibility for their actions?

Sheesh.

[Lance_Boyle]

15. shit-ass christ - WTF reasoning is that?

Do I go into a Best Buy and assume they won't sell me more TV than I can afford? What about the Toyota dealer - is it their fault if they sell me more car than I can afford?

This is fucking criminal. A bunch of greedy-ass gits sign contracts knowing full well they can't live up to them, and now expect uncle sam to bail their greedy asses out. FUCK THAT!

"Oh, but they never should have sold me that, knowing that I can't really afford it." BULLSHIT! You never should have bought it, knowing you can't afford it. ACCEPT RESPONSIBILITY FOR YOUR OWN STUPIDITY! How hard is that?

[Gormy Cuss]

17. It's better reasoning than comparing it to a purchase at Best Buy.

Fact of the matter is that when mortgages were held in portfolio by the lender that is EXACTLY how they operated -- if they didn't think you could afford the loan, you didn't get it. The mortgage business changed and now the loans are securitized. That allowed higher risk taking on the part of the lenders.

If you believe that "greedy-ass gits" are the bulk of the people defaulting on loans these days, you're incorrect.

[Lance_Boyle]

18. you think I'm incorrect?

I've seen no offer of proof to back up your assertion. Only an army of whiners complaining that people greedy enough to take out loans they couldn't afford to pay back should be bailed out. Majority or minority - when an adult signs a legal contract, s/he should be held to the terms of that contract. It is up to the BORROWER to know what s/he can afford. Lots of greedheads failed in that duty. Now they lose the homes they occupied illegitimately. Boo fucking hoo.

[Gormy Cuss]

21. I see no proof to back up your assertion.

Here's a starting point for reading about predatory lending practices, if you really are interested.

the nonprofit, nonpartisan Center for Responsible lending has many papers on this topic. Here's one:
http://www.responsiblelending.org/issues/mortgage/quick...


There's also the HUD-Treasury Deot joint task force report on predatory lending from 2000. It didn't get any better in subsequent years.
http://www.huduser.org/publications/hsgfin/curbing.html

HUD User and the Joint Center for Housing Studies (see earlier post for a link on complexity of mortgage loan offerings) are two good sources for such info. If you have the time, read their offerings.

[spinbaby]

3. But yet they keep advertising on TV

[slackmaster]

13. It's going to be an uphill battle trying to prove that Countrywide did anything wrong

That is, illegal or actionable. Morally wrong, maybe; but lenders are often subject to claims of discrimination when they refuse to make loans to people.

...Defaults and subsequent foreclosures have been most pronounced on adjustable-rate mortgages made to borrowers with past credit problems....

Which is exactly what one would expect; that is the reason lenders charge higher interest on sub-prime loans.

[Pathwalker]

19. Countrywide REFUSED to give us a home loan because...

we wanted a fixed rate loan for less than HALF of what our home is worth. Instead, they offered us a variable rate loan, but only if we made the loan for 100% of our home's worth. This was in 2005, when we wanted out of the variable rate mortgage we already had - but for less than half its worth. Sure, we'd have gotten almost $100,000 in the equity we've built up through the years, but we didn't want to touch it.
According to the mortgage broker, Countrywide wasn't even offering fixed rate mortgages back then, and we were stupid for refusing to cash out our equity. It got rather heated between my husband and the broker, who liveD half a mile from us. My husband said he should be ashamed of himself - he said he was laughing all the way to the bank, and was making money hand over fist. Unfortunately for him, though, HIS house is now in foreclosure and is on the market. We went across the street to a smaller mortgage company, and got the fixed rate mortgage at a good rate, for the amount we wanted - we walked out of the closing with a check for $28.00, and with a payment we can easily make each month.

FUCK Countrywide. Anyone who thinks they were honest brokers must not have dealt with them.

[sandnsea]

22. I tried saying this a while back

People wouldn't believe me that there were mortgage brokers out there who wouldn't offer fixed rates at all. I can't blame the young people who didn't know any better.

[SoCalDem]

20. Gee whiz.. their CEO was am honored guest panelist

just last week at some hearings I watched on c-span.. Hubris runs amok in republican circles..

Maybe he can attend another hearing via a remote to his jail cell...


oh wait.. he won't do time.. he's got friends in high places and billions stashed in the caymans..

[Blackhatjack]

23. If CountryWide Falls, Better Put On Your SeatBelts! The Floodgates Will Open...

... and the bottom is going to drop out of the mortgage market.

THis will inevitably require many other hedge funds and financial houses to put those 'off the books losses' on the books, and that will expose the breadth and depth of the Losses that no one wants to publicly admit to while they are busy trying to pawn them off on other investors worldwide.

Rule # 1 - Large Investment Banks and Lenders never act in any capacity that does not directly benefit themselves.

Rule # 2 - Always characterize your actions as being in the 'public interest' when you are trying to CYA.

Rule # 3 - If you cannot hide the losses forever, maybe hiding them a little while longer is good enough to help you reduce your own losses.