Required Reading in Subprime Land
Here’s a fascinating look into just how IndyMac Bankcorp., a once-hot mortgage lender now on the verge of collapse, really worked. It’s just out from the Center for Responsible Lending, and it’s important because it documents something long suspected but not always proven in the subprime market - that orders to mislead borrowers and push risky loans came straight from the top.
The findings are based on interviews with ex-IndyMac employees and a review of lawsuits in 10 states. According to the report, former mortgage brokers for the firm say they knew they shouldn’t be closing certain loans but were pressured to do so by higher-ups. As part of their regular business practices, brokers worked closely with top IndyMac executives to mislead borrowers about their rates and stick them with higher fees. The loans often were based on inflated appraisals and exaggerated incomes. In particular, IndyMac treated elderly and minority borrowers unfairly, CRL says.
From the report:
I would reject a loan and the insanity would begin,” one former underwriter told CRL. “It would go to upper management and the next thing you know it’s going to closing. . . . I’m like, ‘What the Sam Hill? There’s nothing in there to support this loan.’ “
The report’s author is Michael Hudson, an investigative journalist who also revealed the boiler room atmosphere that pervaded Ameriquest, a major subprime lender forced to pay out more than $300 million in a settlement with state law enforcement and regulatory officials over its lending practices. If Hudson’s name sounds familiar, he’s also the reporter featured in “Maxed Out,” interviewing victims of predatory lending.