Wednesday, May 30, 2007

Subprime Mortgage Manipulations Being Exposed

Bloomberg.com ran an extensive, detailed story today about the excesses that took place in the subprime mortgage lending market and highlights the escapades that went on at Costa Mesa, California based Secured Funding Corp., a Southern California mortgage originator.

Among the sub-stories contained in the article are:

1) The story of Taher Afghani, who went from making $58,000 a year managing a Target distribution center, to pulling down $120,000 when he joined Secured Funding. "Afghani and other subprime veterans say their job was to reel in borrowers, period. Never mind whether customers needed loans or could manage payments."

2) How "anyone can work for a big lender under the umbrella of a single corporate license. The [California Association of Mortgage Brokers] estimated that a minimum of 600,000 people were peddling loans in the state last year. In other words, the corporation can hire a loan originator right off the street and have them originating loans that day without any education, licensing or individual accountability."

3) The story of Charlyn Cooper, a former Secured Funding underwriter, whose "job was to rein in the salespeople and make sure paperwork was legitimate so Secured Funding could sell its loans upstream. She says Secured Funding unloaded most of the loans on HSBC Holdings Plc's HSBC Finance unit, which has been racked by the subprime blowup. [...] Secured Funding salespeople didn't always appreciate Cooper's scrutiny of loans, she says.

4) The lawsuits from individual borrowers that are piling up around the country against the big lenders in the industry and the prospect that details of "[m]any subprime sales techniques are now spilling out in the lawsuits, advocacy reports and Congressional hearings."

For more, see Subprime Fiasco Exposes Manipulation by Mortgage Brokerages.

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