Mortgage Servicers Bought Loans Blindly
Here’s a fascinating exchange between Rep. Maxine Waters (D-Calif.), chairman of the House Financial Services subpanel on housing, and Mary Coffin, executive vice president of Wells Fargo‘s mortgage servicing division, during yesterday’s hearing to examine how effectively the administration’s voluntary mortgage modification program is preventing foreclosures. (Not very, it turns out.) The exchange reveals that at least one of the nation’s largest mortgage servicers — the companies that buy the rights to manage loans from mortgage originators — has a history of buying up loans without first checking their legitimacy.
Waters: When you bought the loan from this mortgage company, you had to look at it to see what you were buying, right?
Coffin: Not loan by loan.
Waters: Not loan by loan. You got packages?
Coffin: [Nods in agreement.]
It’s a curious response. You wouldn’t buy a car without taking a test drive, wouldn’t buy a house without a walk-through. Yet here were servicers snatching up mortgages with such urgency and nonchalance that they didn’t even care to investigate their soundness.
Waters says she has constituents who have been victims of mortgage fraud, their incomes falsified by mortgage originators to justify the terms and to make the loans look less risky than they were to entice the servicers vying to buy them up — situations that proved disastrous to all parties when the housing market tanked and home prices went underwater.
Complicating the issue, Coffin said, “many of the companies who originated those loans are out of business.”
Try squeezing the accountable party out of that mess.