More About Confession
Bank Lawyer’s Blog:
Last week, James Hagerty of The Wall Street Journal reviewed former subprime mortgage broker Richard Bitner’s book “Confessions of a Subprime Lender” (which we discussed in April). Hagerty describes it as “an unflattering portrait of an industry that claimed to be all about
helping people…achieve the American Dream but was really
about grabbing loan-origination fees and foisting the dud mortgages on
investors.”
Among other astute observations, Hagerty gives Bitner his “props” (as we did) for not acting as an apologist for subprime originators.
To his credit, Mr. Bitner owns up to a fact that many lenders still
haven’t admitted: Just because Wall Street was willing to supply
endless funding for crazy mortgages didn’t mean that lenders were
forced to make the loans. “We decided whether a borrower was a good
credit risk and we funded the loans using our own money (before selling
them to investors). No one else made that final decision,” he writes.
The article also lists the manipulation of credit underwriting information and outright crooked practices by some originators. Among the practices excoriated by Mr. Bitner was the “piggybacking” of those with poor credit scores on the backs of those with good credit scores (a practice we’ve previously questioned). I haven’t yet read the book, and the article doesn’t clarify whether borrowers actively cooperated in these practices, or whether they were solely the result of greedy (and ethically challenged) loan originators.
As for the geniuses on Wall Street who funded this disaster, Mr. Hagerty’s criticism is harsh.
They had plenty of brainpower but fell short on common sense. I look forward to reading their confessions.
I wonder if he means confessions of the literary variety or of the legal variety. Perhaps both.
H/t Housing Wire