Subprime Mortgage Problems
Loan Officers across the country were calling Stated Income Mortgages Liar loans.– With bad credit mortgages borrowers didn’t need to prove their income and in some cases their lack of home equity was overlooked. These borrowers did not have to come up with a deposit and mortgage brokers often disregarded their assets and compensating factors. The subprime mortgage lender made a lot of money - and the customer typically ended up paying a much higher rate of interest. There has been some anecdotal evidence that companies were deliberately pushing people into such loans when they simply weren’t suitable. FHA refinance loans that are insured by the government do not allow “stated income”, or “no income no asset” types of documentation for FHA refinancing or new home purchase mortgages.
Beth Jacobson worked for Wells Fargo, one of the largest banks in the US - for nine years. She was a champion salesman for the company, shifting huge numbers of subprime mortgages. Some awards are the shape of table-top obelisks. Others look more like local football club trophies, with small metal plates screwed onto them, and a list of dates and numbers. The numbers are large. “That was for $4.9m for 17 subprime home loans. This month was 26 subprime mortgage loans. I did over $6m at that point,” she says. She says her tactic was to make sure all the home loans she issued were for subprime borrowers. “It was a lot easier to put people into a sub-prime loan. If you take the application and said ‘OK, how much do you have in the bank?’, and then not ask for any back-up documentation, that would keep it as a subprime mortgages,” she explains. “If you would have asked for a few bank statements, that would have proved that they could have gone prime, but if the subprime loan officer has already been able to sell that mortgage rate to that customer, then why would you take it prime and cut your commission by two-thirds?”
Beth was one of the first to “come clean” with what was going on and therefore to shine some light onto the origination of the foreclosure crisis which helped ignite the global recession. “I think to some degree you knew you were putting people into loans they really didn’t need to be, but we were doing exactly what the company asked. At that time in the office we’d say ‘we’re riding the stagecoach to hell’.” Beth Jacobson is now a key witness for the city of Baltimore. The city is suing her former company Wells Fargo, accusing it of pushing sub-prime loans on people who qualified for “A-paper” prime home loans, singling out African Americans for home loan payments they could not afford, pushing many into foreclosure and ultimately leaving the city to deal with sunken housing market.
One of the things that is noticeable is that the foreclosures are concentrated in predominantly African American areas, and that forms part of the city’s case against big banks. For years in such districts it was often impossible to get a loan - a process called red lining. Now the city says banks engaged in reverse red lining. They pushed subprime mortgages in places where people were historically unable to get loans, and perhaps didn’t understand the details of the mortgages they were being sold. Learn more about the subprime crisis, foreclosure prevention options, mortgage live transfers and loan modification leads, go online and we will email you the latest posts and RSS feeds from the Loan Modification Buzz.
Comments
Fannie Mae loan modification is nothing but sub-prime lending. I started out with a mortgage 8% fixed 30/yr. Requested my original servicer to defer one pyt.I was current at the time. Advised me that they could not do that. Therefore,they I was instructed to default. This would qualify me for loan modification. I completed the first “Good Faith Agreement” which was at a much lower note. I completed the arrangemets. All was fine. I , then recived a second good faith agreement, asked why? They said part of the steps. I paid the first note. Then received another letter stating I was behind in escrow. Contacted my Congressman Office,in turn contacted NACA. NACA contacted Fannie Mae came toagreement that PMI and taxes would be included,note would be at 3% first year, 4% second year and 5% third yr/remainder of contract. When I went to make first pyt on this agreement. They refused my payment saying that I would have to pay extra funds for PMI and taxes monthly(4000.00)arrearges. This puts me back at the orignal amount of mort. Also I lose any credit for pyts I made before.(Starting all over as if I purchsed the home again)If I had known this would happen I would have never got into this. This is also report as delquient pyts.This is why Fannie Mae was able to say that they got theseproperties, They forced people into foreclosure.
Leave a Comment