Five years after the financial crisis crested with the bankruptcy of Lehman Brothers Holdings Inc. Many are developing new loans that target borrowers with low credit scores and small down payments, pushing the limits of tighter lending standards that have prevailed since the crisis. The Center for Public Integrity in identified the top 25 lenders by subprime loan production from through Today, senior executives from all 25 of those companies or companies that they swallowed up before the crash are back in the mortgage business.
As the industry regains its footing, these specialty lenders represent a small but growing portion of the market. Lawsuits by federal regulators and shareholders have surfaced tales of predatory lending, abusive collection practices and document fraud. As borrowers defaulted at increasing rates in and , global financial markets tightened, then froze. The result was the worst economic crash since the Great Depression.
Today, millions of Americans still face foreclosure. Yet few subprime executives have faced meaningful consequences. To be sure, loans offered by their new companies face unprecedented scrutiny by regulators and investors. Many of the riskiest practices from the subprime era have been outlawed. Others have tapped the same private investors who backed out-of-control lending in the previous decade. The lenders vary in how willing they are to accept lower down payments, weaker credit scores or other factors that can make a loan more risky.
New Penn Financial allows interest-only payments on some loans and lets some borrowers take on payments totaling up to 58 percent of their pre-tax income. The maximum for prime loans is 43 percent. He led a consulting firm that became a temporary haven for at least 15 former First Franklin employees.
By , Pollock was co-CEO of Rushmore Loan Management Services, a company that traditionally collected payments on loans and is now originating loans. The company offers adjustable rate mortgages and down payments as low as 5 percent. Pollock is among at least 14 founders or CEOs of top subprime lenders whose post-crisis employers want to serve consumers who might not be able to qualify for bank loans.
In July, she was named chief operating officer of Prospect Mortgage, backed by private equity firm Sterling Partners. In , California state regulators accused Konrath and LendSure of collecting illegal upfront fees from people seeking loan modifications and failing to maintain required records.
The FHA, the VA, and GSEs facilitated policies such as redlining and discriminatory lending that increased segregation and prevented people of color from attaining homeownership in desirable areas. However, the process of correcting these errors has been slow, with significant backsliding, and much of the damage of these shameful policies persists to this day. They then sell these securities to investors, guaranteeing the monthly payments on the securities. In fact, just days before the mortgage crash, a housing-justice organization had awarded my Countrywide interviewee a lifetime achievement award for his work in subprime markets. The emphasis on personal responsibility and privatization of government programs in the recent rhetoric of homeownership belies structural problems: homeowner prosperity during the recent boom was based not on rising incomes — which have stagnated since the s — but on debt-financed consumption. While this role does expand access to mortgage credit, and played a key role in kick-starting the growth of American homeownership following the Great Depression, FHA-insured mortgages have never dominated the American housing market. NOOK Book.
With LendSure based in San Diego, Konrath has been able to keep his secluded, 4,square-foot house in nearby Poway, as well as a ski chalet near Lake Tahoe. Most of the bad loans that brought about the crash in were made by lenders that were not owned by banks. These companies cannot accept deposits — their loans are funded by investors, including private equity firms, hedge funds and investment banks. In the run-up to the crash, big Wall Street investment banks binged on subprime lenders, spending billions to buy them up and resell their loans just as the market turned.
Lehman Brothers, for example, bought BNC Mortgage in and financed subprime loans offered by other companies. As the mortgage industry undergoes another wave of consolidation, non-bank lenders are again attractive targets for investors seeking to enter the mortgage business overnight. They also remain far less regulated than banks that take deposits. Banks tend to offer only the safest home loans — those that qualify automatically for government backing.
New regulations have made lending standards so tight, industry officials argue, that many Americans who should qualify for home loans are effectively shut out of the market. Non-bank lenders now face on-site examinations by the Consumer Financial Protection Bureau and can be punished for making deceptive loans, or loans that borrowers clearly cannot repay. The CFPB found recently that many lenders lack basic systems to ensure that they comply with the law.
Still, lenders are finding other ways to offer loans to people who can only make a small down payment or who have lower credit scores than traditional banks will accept. Carrington Holding Co.
The average credit score for a prime mortgage borrower now tops Christopher Whalen, executive vice president and managing director at Carrington, says borrowers with banged-up credit histories are safe bets if they can show they have the income and savings to afford payments. So far, non-prime loans by non-bank lenders are only a sliver of the market — 5 percent, by some estimates. But the industry is mushrooming in size.
The two fastest-growing lenders are not owned by banks. To get a sense of the growth, one need only look at the volume of non-government-backed loans that are being pooled into mortgage bonds. Those days are gone. Rossi got his start during the savings and loan debacle that felled lenders in the s and s, he says, and left the industry during the crisis. Smith School of Business. At CS Financial, chief marketing officer Neal Mendelsohn referred questions about chief operating officer Paul Lyons to Ameriquest, where Lyons was director of whole loan sales until , when the company stopped lending, according to his LinkedIn profile.
Van Dellen, the former IndyMac executive who is lending to flippers, hung up on a reporter and ignored an emailed interview request. In fact, many resell most of the loans they originate to other investors. PennyMac, a fast-growing company founded by former Countrywide Home Loans CEO and IndyMac director Stanford Kurland, is a sprawling concern that earns fees by originating loans in call centers and online. It consists of two intertwined companies: a tax-free investment trust that holds mortgage investments and an investment advisor that manages the trust and other investment pools, among other activities.
PennyMac buys loans from pre-approved outside sales offices, bundles them and sells off the slices. It forecloses on properties and amasses portfolios of loans and mortgage-backed securities as investments. Ninety-seven percent of the loans were purchased from outside lenders. Most emerging non-bank lenders are smaller than their pre-crisis predecessors and specialize in a handful of these activities. They accomplish this through aggressive acquisitions or by buying the assets of bankrupt companies.
PennyMac paid roughly 29 cents on the dollar for the loans, and says the investment has performed well. But Kurland and his team appear to have grand ambitions. Countrywide made the most high-cost loans in the years before the crash and is among the lenders considered most responsible for fueling the mids housing boom. It was founded in , and by , became the biggest home lender in the country. The 14 members of its senior management team had spent a combined years in the mortgage business, the filings say.
This year, the former Countrywide executives who manage the investment trust sold separate stock in their investment advisory and lending firm, PennyMac Financial Services, which earns millions of dollars in fees for managing the publicly traded, tax-free trust. PennyMac Financial Services also manages separate mortgage funds for big-money investors.
PennyMac said in a separate written statement that the complexity of the mortgage business demands experienced and expert leaders. Brenda Fore, a former office supervisor who lives in rural West Virginia, has been on government disability benefits since a drunk driver struck and injured her in Her husband, George, has suffered from a traumatic brain injury since , also caused by a drunk driver, while working at a trucking company.
Maybe this person will have more patience October 28, - Published on Amazon. This book was one of the worst I have read - and I have read quite a few about the housing crisis of the past few years. There was probably about three pages telling a sad story about a woman and her children who lost their house due to their ARM skyrocketing.
I believe, a few chapters later, he repeats the same story. The rest of the book is all about the author himself and is very boring.
Nothing substantial is in this book about Countrywide. Hence, a rip-off. A must for anyone wanting to read about the housing crisis and crash of October 3, - Published on Amazon.
grupoavigase.com/includes/189/723-clases-de.php I don't like writing negative reviews because books are tough to write. I give credit to anyone who tries to put pen to paper, including this author. However, I simply can't recommend this book. In a non-fiction work I expect names, details and finger pointing if warranted.
When reading this book I got the feeling the author had his attorney looking over his shoulder as he was writing making comments like, "You can't say that or you'll get sued. In your next edition step up to the plate and name names and places. Take a few shots if warranted. Your book should have a place on the history book shelves if you do and it will be a much better read. October 18, - Published on Amazon. I read this book as part of research on the mortgage industry. In the same way that "Born to Run" weaves a scientific story around an incredible story, this book educates and entertains at the same time.
Beyond that, there are some interesting ideas and recommendations at the end, such as the foreclosure fault index.