I've fallen embarrassingly far behind in my reading of the Times, but here are some of the articles I have managed to get to:
Today's edition includes an extraordinary column by Gretchen Morgenson, "Was There a Loan It Didn't Like?" about loan underwriting by WaMu. Ms. Morgenson apparently interviewed a former WaMu senior mortgage underwriter, Keysha Cooper, about the pressures she experienced to approve loans, including loans which she believed were fraudulent. Some excerpts:
“At WaMu it wasn’t about the quality of the loans; it was about the numbers,” Ms. Cooper says. “They didn’t care if we were giving loans to people that didn’t qualify. Instead, it was how many loans did you guys close and fund?”
* * *
One loan file was filled with so many discrepancies that she felt certain it involved mortgage fraud. She turned the loan down, she says, only to be scolded by her supervisor.
“She told me, ‘This broker has closed over $1 million with us and there is no reason you cannot make this loan work,’ ” Ms. Cooper says. “I explained to her the loan was not good at all, but she said I had to sign it.”
The argument did not end there, however. Ms. Cooper says her immediate boss complained to the team manager about the loan rejection and asked that Ms. Cooper be “written up,” with a formal letter of complaint placed in her personnel file.
* * *
Ms. Cooper says that her bosses placed her on probation for 30 days for refusing to approve the loan and that her team manager signed off on the loan.
Four months later, the loan was in default, she says. The borrower had not made a single payment. * * *
The rest of the article is definitely worth reading. Ms. Cooper is now unemployed.
Yesterday's Times brought Joe Nocera's column, "A Rescure Hindered By Politics," listing various proposals to help homeowners stay in their homes. Nocera also explains his view about why the administration hasn't adopted a homeowner plan yet:
As I understand it, the money is not the hang-up. * * *
No, the hang-up, apparently, is that aid is going to homeowners, not giant financial institutions, with the negotiations revolving around who will be eligible for the program and what will constitute an affordable new mortgage. [The FDIC's ] Ms. Bair is arguing for a broad definition; the Treasury wants something narrow, which of course will mean fewer people will get help. This is hardly a surprise. One of the reasons previous efforts at helping homeowners have had such little success is precisely because the Treasury has insisted on defining the number of eligible homeowners as narrowly as possible.
* * *
The only legitimate reason for [treating banks better than homeowners] is the one that my colleague David Leonhardt has put forth — that if the government says it is going to help homeowners in danger of foreclosing, it will create an incentive for a lot more homeowners to decide that they’re in danger of foreclosing. But I would argue that the country is far better served at this late date by erring on the side of generosity. Isn’t it better to let a few homeowners get relief who might not need it (just like JPMorgan!) than restricting the eligibility so narrowly that people in real trouble will not be able get their mortgages modified? Yet the Treasury instinctively prefers the latter.
And, he concludes: "To delay any longer isn’t just short-sighted. It’s inexcusable." Back on October 24, the Times ran "U.S. Vows More Help for Homeowners" about the administration's efforts to create such a plan.
But the government is not the only entity that can help homeowners. The Times also reported yesterday that "Banks Alter Loan Terms to Head off Foreclosures." The article explains: 'On Friday, JPMorgan Chase became the latest big bank to pledge to cut monthly payments, by lowering interest rates and temporarily reducing loan balances for as many as 400,000 homeowners." Banks engaging in such practices are acting out of self-interest and ultimately are helping only a small percentage of borrowers in trouble.
Still in yesterday's paper, Ron Lieber's Your Money column reports on a novel way to avoid taking out bad loans in "Financial Wisdom in Groups." An excerpt:
* * * as we consider how to avoid this collective financial mess again, one question keeps rolling around in my head: How much better off would the world be right now if people had their own personal finance committee to consult before making big money decisions?
The balance of the column reports on the story behind a new book, "The Smart Cookies' Guide to Making More Dough,"and the related web site, smartcookies.com, about five women who formed such a committee. Somehow I doubt we're going to see that one added to the Truth in Lending Act.
Going back in time in the Times, Bob Tedeschi reported on October 26 in "Reverse Mortgages Retooled" on the new rules for reverse mortgages. Tedeschi notes that the new law requires counselors to pass exams that test their knowledge of reverse mortgages and that "borrowers will pay for counseling sessions, which can cost $125."
And just to get away from lending, the October 25 issue had an interview with Michael J. Critelli executive chairman of Pitney Bowes headlined "In Defense of That Daily Visitor, Unsolicited Mail," about the effort to enact do-not-mail legislation, similar to the do-not-call registry. Critelli's perspective: "it’s not an environmental issue, and it’s not an identity theft issue. It’s the right of people to decide what they get. "
Returning to lending issues, the October 24 edition included "Some Hedge Funds Argue Against Proposals to Modify Mortgages." The story reported that "Two funds recently warned mortgage companies that they might take action if the companies participated in government-backed plans to renegotiate delinquent loans in a way that undercut the funds’ interests." That brought an article the following day: "Mortgage Threat From Hedge Funds Irks Democrats."
More when I get more time.
Just think how embarrassed someone (like me) who does not regularly read the New York Times must be!
Posted by: Brian | Tuesday, November 11, 2008 at 12:09 PM