The Center for Responsible Lending recently released a report titled "IndyMac: What Went Wrong?" analyzing some of the mistakes they, and many others lenders, made in the last few years. This is quite good timing considering the recent closure of IndyMac's mortgage unit and it falling under FDIC protection. In the report, the Center "finds substantial evidence that IndyMac routinely made loans with little regard for their customers' ability to repay the loans". The investigation also found that in the Center's opinion "IndyMac's current problems appear to be largely the legacy of top-down pressures that valued short-term growth over making responsible lending decisions."
This disinterest in learning about clients needs, disregard for the suitability of the recommended financial products and focus on short term "rate/payment" has without a doubt led to many of the problems we now face. Many in the industry became "sales people" or "order takers", quoting rates without offering any disclaimers or burying the risks in the fine print. A true mortgage consultant, like any financial advisor, should focus on the long term stability and financial security of their clients. It is in this way that we not only serve clients interests but ensure the survival and growth of our business.
The Center's report also stated that IndyMac:
• pushed through loans with bogus appraisals and income data that exaggerated borrowers' finances
• worked hand-in-hand with mortgage brokers who misled borrowers about their rates and other loan terms and stuck them with unwarranted fees
• participated or allowed bait and switch, discrimination and falsified paperwork to occur
There are currently several lawsuits against many lenders and brokers claiming that borrowers were deceived by loan officers who promised low rates. Instead, the lawsuits say, the teaser rate evaporated within one or two months to be replaced by much higher interest rates and payments.
Once again, this stresses the importance of working with licensed mortgage professionals. Furthermore, it is essential to research your lender and loan officer, including how much experience, licensing and education they have. After all, anyone can say they have a great rate (they are sales people after all) but not everyone will work diligently and honorably for their clients. There are many great lenders and brokers here on activerain and elsewhere, but consumers need to be careful that they will get the service and value they deserve.
For a full copy of the report, visit the Center for Responsible Lending website or download the report here.
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Roland Carrillo, PhD
Branch Manager
VanDyk Mortgage in Cary, NC
Email: rjcarrillo@gmail.com
Website: http://www.mymortgageanalysis.com/
Our branch specializes in affordable lending options including FHA / VA and the Community Heros program. As both a banker and a broker, you have access to a full menu of products including all Fannie Mae and Freddie Mac Conforming loans, Reverse, Jumbo and Commercial financing on a variety of property types. We are located in Cary, North Carolina and are within easy reach of the entire RTP Area including Wake, Durham and Orange Counties.
This is a good comment, however, I continue to wonder about all of the studies and surveys and reports that never give any blame to the customer. Yes, there were bad and greedy people on the lender side, but really, how many people truely believed they could buy a $400,000 house for nothing down and be able to pay for it with a $2,000 a month job? I know that most states, like Oregon, have escrow closings and everyone I have ever been to was very, very, very specific about the payment details.
Thanks for your post
Fred- Yep, the Center for Responsible Lending is a "consumer watchdog" that has a bias so you get one side of the story. I do not blame the market down turn on the availability of programs like stated income or interest only, not even Option ARMs. When used prudently these are great programs that expand home ownership and serve a benefit to consumers with specific needs.
The problem is that many were sold by lenders without regard to risk (or proper disclosure of it) and bought willingly by greedy consumers that wanted to speculate on housing going up another 20%. Its on both sides, consumers knew that a teaser rate would not last and an ARM would reset... and sooner or later you had to pay the debt back. But they ignored that hoping to become the next "real estate guru" or to simply enjoy the high life without the income to support it.
All part of the "buy now, pay later" culture that led to many homeowners in foreclosure with Plasma TVs, new cars and all the other items they should never have bought. But many lenders did drop standards and shift from responsible lending to a purely sales mentality to fund any loan. While good for the pocketbook in the short term, the lenders now have to pay for their excess as well.