21 Comments »

1. Wow, great outcome.

   Comment by Dawn — April 6, 2008 @ 7:36 am

2. Just a few comments on the above.

   Her original note of $171,000 was a fixed rate of 8.5% and her monthly PITI payments were under $700.

   Comment: Her payments could not have been $700 PITI. This is mathematically impossible. Even an “Interest Only” paymentwould be $1211.25 (171,000 X 8.5% divided by 12). A principal and interest payment amortized over 30 years fixed rate would be $1314.84. Her PITI payment could not have been $700. There must be a mistake on the comment.

   Her original loan payment including tax and insurance would have been much more then her take home pay. The original loan may have been a “Pay Option Arm” with a payment rate at 1% and a fully indexed rate of 8.5%. With this program the P&I payment would have been $550/month. Add to that tax and insurance and she was probably at $700.

   No way could she have had a fixed rate loan. She was obviously oringally and on refinance a sub prime borrower. A fixed rate sub prime loan would have been dobule digits then. I am also curious as to how she even got a loan with a 532 score unless there was a large amount of equity over and above the new loan amount.

   Also her first loan had to be stated/stated as well. She simply did not qualify for the original loan either unless done with the POA.

   The lender made close to $20,000 on this loan.

   Comment: The max fees allowed is 7.9% of the loan amount (including all lender and broker “junk” fees) which is what had to be charged to earn that much on a $243,000 loan. Let’s tell it like it is. Most lenders did not and do not allow brokers to make anywhere near that. The cap is 4-5% and very few brokers make that. Let’s tell it like it is. The only National lender I know of that was charging that much was Ameriquest. They are gone and I for one was happy to see their demise. Most of their LO’s know little about the mortgage industry and hopefully are back to selling cars or security alarm systems (be careful on those purchases and their financing).

   What is even more troubling is that the founder of Ameriquest was rewared by our Federal Government and was appointed a U.S. Ambassador to a European country. He recently resigned due to family health issues. Does anyone see a problem with the reward?

   The borrower’s new principle and interest payment alone was over $1298.92 which is more than her net take home from a pay check that grosses only $1548.

   Comment: Again, this is not possible. Interest Only on a $243,000 loan at 12.25% is $2480.63.

   The borrower was not aware that she was not escrowing her taxes and insurance.

   Comment: I have heard that all to often in my experience. Most borrowers if not all of them are mostly concerned with their monthly payment and always ask what it will be. Even when told they are not escrowing most forget that minutes after leaving the closing. People have selective memory and what they remember is their payment not the explanations given them. Most (not all) closing agents do a good job in disclosing ALL the information in terms of describing the loan and its particulars. Disclosures are provided that a borrower must sign. RESPA reform is calling for even more paper disclosures to help protect the consumer. If the consumer DOES NOT ask about what they are signing BEFORE they sign then all the RESPA reform with all the new disclosures will make absolutely NO DIFFERENCE.

   There must be some borrower responsibility here.

   This borrower paid off at least $42,000 of other debt or put that money in her pocket or a combination thereof. There was a benefit of some kind here. Where did that money go?

   Ultimately, the lender made a principle rate reduction of $68,000, and recast the note to a fixed rate of interest of 6% which resulted in a new principle and interest payment of $600 per month.

   Comment: Once again, I just don’t understand the math. Reducing the loan amount as stated creates a loan amount of $175,000 and at 6% INTEREST ONLY the payment would be $875.

   There must be more to this story as there is much that simply just doesn’t jive.

   The bottom line however, is the LO and his Fortune 100, national company should NEVER have made this loan. The LO probably didn’t know any better and was just doing what he was told, how he was told in his very limited company training. It NEVER should have gotten past his manager/supervisor or the processor UNLESS the company mandated them to write everything. Very true of the company I mentioned above and a few others I know about.

   As I have seen and heard of the deceptive practices in the mortgage industry, many of them (not all) came from not the top executives of these major corporations. Corporate America has truly aided in taking unfair advantage of us. As with Enron, many ot those that were guilty are now happily serving other corporations at the same if not greater “insane” incomes.

   CAVEAT EMPTOR! Buyer Beware. More so today then even yesterday.

   Comment by Larry Rubinoff — April 6, 2008 @ 3:43 pm

3. My aplogies. I accidently hit the “submit” button when trying to scroll up to proof.

   The second to the last paragraph should have read:

   I have seen and heard of the many deceptive practices in the mortgage industry. Many of them (not all) came from the top executives of these major corporations through their corporate policies and mandates. Corporate America has truly aided in taking unfair advantage of us.

   As with Enron, many ot those that were guilty are now happily serving other corporations at the same if not greater “insane” incomes.

   Comment by Larry Rubinoff — April 6, 2008 @ 3:52 pm

4. Yeah, my husband pointed out that the numbers didn’t come close to adding up.

   So what’s the REAL story here?

   Comment by Dawn — April 6, 2008 @ 6:38 pm

5. Maybe Dr. Lacefield can clarify this for us.

   The outcome was favorable for the borrower but was it simply legal maneuvering.

   Fraud needs to be stopped. Bad loan officers need to be gone and those large companies and their executives operating in a deceptive and/or fraudulent manor need to be punished as well.

   Relief of some kind needs to be given to those truly wronged. We need to be careful that legal maneuvering to those not wronged by the system but by their own mis use or abuse of the system not be.

   In the above case, what happened to the “cash out” money. Were they going to use it to pay their mortgage payments because “they knew” they could not afford the one they had or the one they got? Maybe they went out and bought a new car instead of making mortgage, tax and insurance payments. I am not saying they did, but I have seen many who have – then cry “foul”.

   We need ALL the facts here to clarify the inconsistencies.

   Comment by Larry Rubinoff — April 8, 2008 @ 3:11 pm

6. Once in a while what I see and read bothers me. This is one of those times. As I read the post again I see this:

   The borrower was an African American female who had challenged credit (her score was 532) but had been employed at the same job for about 22 years. She was a teachers assistant with a local public school district earning a gross monthly salary of $1,548. She also had a 12th grade education and a lifetime of working with elementary school students.

   First and foremost, the fact that this was an “African American female” should not enter the equation. Race and gender is not the issue here and if it was, we need proof as this opens an entirely different issue.

   The fact that she had “challanged credit” (a 532 score) is a large part of this issue. What it really means is that she had exhibited a history of not paying obligations timely or possibly not at all. This credit score certainly does NOT justify a 6% rate.

   Her 12th grade education also is not a factor and should not have been brought up. If “she has a lifetime of working with elementary students” then I assume she can read and ask questions if she does not understand what she reads. If she can’t maybe she should not be working with our elementary kids.

   Fraud MUST be prevented. Bad loan officers MUST be taken out of the industry and those large Fortune – whatever number – along with their executives should be punished and shut down, not rewarded and rescued.

   The questions still remains in this story about the “CASH OUT” money that was in the refinance. Where did it go? I believe she knew she could not afford either her original mortgage (because the payment may have reset) or her new mortgage (which was probablly another Pay Option Arm) and intended on using the “cash out” money to make her mortgage, tax and insurance payments. Instead she used the money for other things. I am not saying she did but I have seen many who have. If the “cash out” money was indeed intended for that use and was spent elsewhere, crying foul would be inappropriate and WRONG.

   We need to know ALL the ACCURATE facts about this story.

   Comment by Larry Rubinoff — April 8, 2008 @ 3:43 pm

7. I agree with larry we need to know ALL the ACCURATE facts about the story. This lead to share with you what I seen on T.V. last night about The Last Lecture by Randy Pauschs.
   In his lecture he said the 3 most importante words to remeber is,
   “Tell the Truth” and that is all we are seeking for the truth about this story. Some ones figures are wrong.
   Larry Rubinoff?
   Gary Lacefield?

   Comment by Bob McNeilly — April 10, 2008 @ 12:14 pm

8. Thanks Bob. It seems I have an ally on seeking “the truth”. Until we have the facts on this story, we cannot make any determinations as to its validity. I just noticed the flaws and inconsistencies in what was stated.

   Truth is missing in our society today. It is missing from most main stream media, government, industry insiders and our large major corporations. We seem not only to condone not telling the truth but now give it labels that takes it from a “lie” (which is what an untruth is) to a milder, more acceptable lie – a “somewhat” truth.

   Case in point: Hillary Clinton’s documented, bold face lie about her trip to Bosnia. Documentd on film, proven without a shadow of a doubt and broadcast to the entire world, it was obvious she told a lie. However, it is called a “mis speak”. A mis speak???
   A mis speak due to fatique and stress. In other words, if you can justify a lie it is OK. I am sure every fraudster out there can justify their actions therefore it must be alright.

   Folks, a lie is a lie no matter. White lies, little lies, exagerated lies, all LIES. It is not OK to lie. Seeking the truth in our everyday lives may just help us out of the many problems facing our nation today.

   I seek the truth.

   Comment by Larry Rubinoff — April 10, 2008 @ 5:47 pm

9. As everyone has pointed out the numbers do not “add-up” based upon the information I provided. I have intentionally not put all of the facts into the story because it covers over three years and two flips by the same broker/lender combo. The beginning and ending numbers are on point as well as the monies made by the broker-lender team over the course of the flip and refinances. Yes, I could have presented ALL of the numbers but simply wanted to give an overview of a clear predatory situation where a lady was about to lose her home and we were able to help her stay in her home. Should she be accountable-absolutely, but when a slick fraudster dupes your grandmother out of her life savings because the fraudster made it sound like she was saving the world, do we sit idly by and allow that to happen? That is why they call it “predatory lending.” Hello!

   Law enforcement was contacted both at the state and federal levels, and their comment(s) were “we don’t have the resources” and/or “didn’t reach our threshold of damages.”

   There were NO lies presented here, only a brief synopsis of a successful story. I could share with you the 40-50 cases where the lender and borrower colluded; or borrower and realtor conspired and have been involved with the successful felony pleas or convictions when the local law enforcement took action.

   I apologize if you feel that I misrepresented the issues or distorted the facts. I did not. You can spend your time with the Polliana dream that law enforcement will do what is right, and every borrower should be held completely responsible for signing documents they don’t understand or are blank. I will spend my time trying to make the world better for my grand children by educating, training, and giving people hope that not everyone is out to take advantage of them.

   Comment by Dr. Lacefield — April 11, 2008 @ 5:57 pm

10. Bummer. I had really hoped you would try to explain the discrepancies.

    None of your numbers add up and that has NOTHING to do with my (or anyone else’s) “polliana dream” but simple math, and a decade of experience in the effects of mortgage and real estate fraud.

    Part of making the world a better place is telling the truth – the whole truth – all the time.

    Comment by Dawn — April 11, 2008 @ 8:17 pm

11. You know, maybe it’s just me, but some people who comment here come across as just wanting to stir up trouble. While I can only speak for myself, I found Dr. Lacefield’s explaining of the situation he wrote about last weekend perfectly reasonable and legitimate (questions were asked and he took the time to answer). Rather than thank him and ask for further clarification on the numbers, the most previous commenter chooses instead to sully his good name and contribution here by intimating that he is a liar. How absurd, sad, and annoying. I for one find the whole witch hunting approach to be very distasteful.

    Comment by Elaine — April 11, 2008 @ 11:15 pm

12. It’s not witch hunting, “Elaine.” His numjers don’t come close to adding up.

    He chose not to explain or elaborate, he deflected and danced around it, carrying on about grandmothers losing their life savings.

    YOU do the math and tell me what you come up with.

    ::Her original note of $171,000 was a fixed rate of 8.5% and her monthly PITI payments were under $700.:::

    I’m not really expecting an answer. Thus far, your only contributions here have been two direct swings at me.

    My best guess is that you’re really Kathy.

    Comment by Dawn — April 11, 2008 @ 11:29 pm

13. Dr. Lacefield:
    I appreciate the time you took to respond to the comment thread I began. Let us not take this discussion personally and attempt to keep emotions out. Those of us that participate here certainly have the same concern and goal of eliminating fraud.

    We certainly are not here to challenge anyone’s reputation or credibility. This blogs founder would not permit posts by persons who lack integrity.

    Your response, nevertheless, raises additional questions in addition to the ones still unanswered. I understand the constraints of space in publications such as this which do not always allow for ALL the information to be presented.

    But here are the new issues raised:

    1. You state: “I have intentionally not put all of the facts into the story because it covers over three years and two flips by the same broker/lender combo”.

    Does this mean that your client was involved in these two flips over the three year period or that the broker/lender was involved in them over the three year period?

    2. You state: “The beginning and ending numbers are on point as well as the monies made by the broker-lender team over the course of the flip and refinances.

    What are the beginning and ending numbers you refer to? Are they the mortgage interest rates and payments? If so, it is the payment numbers that are in question. As to the monies made by the broker/lender, was the figure of $20,000 spread out over the two flips and a refi? If so that equates to $6666 per loan average. Not a predatory fee if this is the case.

    3. You state in part: “The beginning and ending numbers are on point as well as the monies made by the broker-lender team over the course of the flip and refinances…”

    The refinance, which was the topic of this story, could not have “fleeced” her out of her life savings. She did NOT come to the table with any cash, she, in fact, walked from the table with cash. In excess of $42,000 if the fees on that particular transaction were less as I indicate it may have been above. She now has the cash taken out by the refi and will NOT have to pay it back as the lender wrote down the loan amount by approximately $68,000.

    4. You state: “That is why they call it “predatory lending.” Hello!

    Hello! You have not proven or indicated predatory lending. If in the refi there was an economic benefit to the borrower (over $42,000 cash) and if the fee was not the full $20K then predatory lending is not the case here. Bad underwriting maybe for a person with a 532 score. Don’t get me wrong here, I have no love for those Fortune 100 companies who were predators from the day they underwrote and funded a loan to the day they securitized it and sold it to “duped” investors world wide. Those same Fortune 100 companies are the ones who immediately pointed their finger at the broker community, labeled us all “fraudsters” and were more then complicit in perpetrating fraud.

    The term “predatory” lending is being used much too loosely and frequently, tainting and destroying an entire industry, many of whom are good, hard working, honest and educated in their profession.

    There is no need to apologize but there still is a need to clarify
    the original questions and the new ones here. I for one am a proponent of lenders lowering rates and writing down mortgage balances. I raised that issue in a weekend post on this blog long before Berneke did. I also do not believe in that “Pollyanna dream”. Law enforcement and the government cannot police this problem nor solve it. Only those who actually underwrite and fund loans can.

    I to, Dr. Lacefield, do spend my time educating the public to make this a better world for my children, grandchildren and all Americans. I have been doing so in the Real Estate, Mortgage and Finance industries since 1969. The basic philosophy I teach is “right is right” and “wrong is wrong”.

    It does not take a college education or even a high school degree for some one to realize that they don’t understand something and ask for clarification. As to signing blank documents, I was taught that early in life by both my parents and my teachers.

    Education is the key. It will be a long road but with people such as you, Ralph Roberts, many of the readers here and me, we can begin to “change the world”.

    Comment by Larry Rubinoff — April 12, 2008 @ 2:11 am

14. I agree with what Larry said,
    ::::We certainly are not here to challenge anyone’s reputation or credibility. This blogs founder would not permit posts by persons who lack integrity.:::::
    All we want is the truth and sometime people don’t tell the truth.
    A $171,000 dollar mortgage @ 8.5% is $1,314.84 PI that does not include taxes and insurance. This is what we want to know you said she was payint $600 PITI. its not even close.

    And just to empisize we are not here to challage reputations we all want the truth. But like in the movie some people can’t handle the truth.

    Comment by Bob McNeilly — April 12, 2008 @ 9:57 am

15. I agree, and if anyone wishes to come down and se the file, I would be happy to share it with them. However, I can not tell the whole story as there are other cases still pending with this lender. Maybe next time I just give generalities. The reason I mentioned race, education, and other facyors is to show that some people can be targeted. And yes, you and I were raised in a differrent environment. Many people have never had the familial experience of home ownership. When a professional tells them that “this is the way it is done” and they (the borrower) do not have the experience, knowledge, or confidence to challenge the professional, then there will continue to be examples such as these.

    The primary reason the numbers do not add up for you is the immediate flip by the lender with an grossly inflated appraisal(s) that took a property that was almost free and clear to a situation that the underwriter should have never allowed to take place. My twenty plus years as a regulator and industry compliance officer has given me the opportunity to see and understand both sides, without necesarily agreeing with them.

    Comment by Dr. Lacefield — April 12, 2008 @ 10:00 am

16. I think that those of us who have been victims of this sort of fraud tend to be more skeptical than others. Once you’ve trusted someone who claimed to want to help you, but then stole from you, it’s very difficult to accept anyone at face value.

    I’d really like to give you the benefit of the doubt, but it’s difficult when you keep providing nothing to explain the discrepencies. Perhaps you simply misspoke with your original figures, because all the flips in the world won’t make a $171k loan have a PITI payment of under $700.

    That said, I’ll let this one go, as antagonizing you won’t help anyone. I simply think it’s important that the readers here UNDERSTAND what is being presented.

    Comment by Dawn — April 12, 2008 @ 12:02 pm

17. “The primary reason the numbers do not add up for you is the immediate flip by the lender with an grossly inflated appraisal(s) that took a property that was almost free and clear to a situation that the underwriter should have never allowed to take place”.

    With all due respect Dr. Lacefield, this keeps getting worse. Your comment above adds even more questions. The numbers don’t add up because of a flip and a false appraisal???? So now this alleged fraud goes from a refinance to a flip? The property goes from having a $171,000 mortgage to being free and clear!!! And basic mathematic principals change because of this. Now you are beginning to insult my intelligence.

    The original quesions are very clear. Answering them in no way can harm your client or other clients. Basic questions:

    What is the payment on this loan in the amount of $175,000 (the value after the write down) at 6%, 30 year fixed rate? What is her real payment?

    P and I would be sufficient.

    What were the ACTUAL fees charged by the broker/lender on the refinance loan you are talking about. Was it $20,000 or was that the total fees charged on the now evident three loans involved?

    Where is the cash she got at closing?

    Where is the fraud?

    As to lack of knowledge in what someone is signing at closing, it is the closing agent, attorney or title company, that is to fault here not the broker/lender. They are responsible for explaining the documents. Did the closing agent commit fraud by not explaining the docs, especially the three day right of recission on a refi?

    We are too quick to lay blame on loan originators. Based on your post, all originators are “fraudsters” and “predators”. I readily admit that the level of fraud committed by the mortgage industry (which includes all of those Fortune 100 companies) may well be recorded by history as the greatest fraud ever in the history of our nation.

    We need to educate the consumer not prosecute an entire industry.

    As to race, gender and education, fraud is impervious to all of that. It spread across all levels of our society. Case in point, Cay Clubs. Again, you insinuated that this case had racial and gender biased implications. Unfortunately, discrimination is alive and well in our country but I believe our current Presidential elections is a major, major step forward. I really don’t believe it was a factor here and is not in most cases.

    Dr. Lacefield, I would welcome a conversation with you on this matter, Guest Writer to Guest Writer on this blog. My phone number is available through the publisher and I hereby, publically authorize them to give it to you.

    Comment by Larry Rubinoff — April 12, 2008 @ 4:51 pm

18. Dr. Lacefield: It is refreshing to know that there are still people who really care about the ones in our society who can’t defend themselves. Your care wasn’t about race, gender, or education, it is about helping your fellowman. None of these loan originators or brokers have commented to the fact that this loan should have never been submitted to underwriting. They will defend their actions by telling you that they were simply “playing by the rules”. No docs, stated income, or limited docs programs created this mess. Wall Street knew of the risk when creating “paper money” for investment. They created an illusion that the economy was clicking-i.e. builders and houses starts. The market was flooded with unsold homes—so what happened—Wall Street relaxed the guidelines for mortgages. If one could “chew gum and hold a pen” they were qualified! So now the federal justice department is going to right all wrongs by jailing the hometown mortgage brokers and L O, while Wall Street buddies slide over and destroy another American dream. Dr. Lacefield, will you please help us expose these criminals?

    Comment by mark calhoun — April 15, 2008 @ 4:45 pm

19. Mark Calhoun stated that “If one could chew gum and hold a pen they were qualified!” Hell, it wasn’t even necessary for one to be able to do both at the same time!!

    Comment by TANFWTL — April 16, 2008 @ 12:15 pm

20. Mark:
    I did comment on her getting the loan in the first place. In my original comment I said:

    “I am also curious as to how she even got a loan with a 532 score unless there was a large amount of equity over and above the new loan amount”.

    There were loans being offered for low credit scores. Wells Fargo did. But they would require 30 to 35% down and I don’t believe you could get a stated income loan with that score.

    Obviously I am wrong as she DID get the loan. Just one more example of how this lender did the underwriting.

    From the story, this was not a brokered loan but a loan by a Fortune 100 company through their retail side. However, that is not clear as Dr. Lacefield states, “The lender was well known, originating loans in all 50 states and is affiliated with a Fortune 100 company”.

    This could have been Di Tech, owned by General Motors or several other large national mortgage retailers who advertised heavily on TV.

    All the major TV advertising was done by large corporations. You rarely if ever saw a mortgage broker advertise on TV. I know that if a broker attempted to advertise in the same manner, they would have been fined or stopped.

    Comment by Larry Rubinoff — April 16, 2008 @ 4:26 pm

21. I donot believe it is the fault of the lenders, but the brokers and the title closing companies and the appraisers . It is unbelievable the things they will tell you to do that is llegal. Behind the scenes
    we dont know what these people do after we’ve signed, nor do the lender because they have already doctored documents to fit
    their agenda , I have three agreements from broker, closing company , and from closing , not one of them are the same and the amount of the home is bumped up by $60,000.00. so many bad things happened in my loan , I dont know where to start, the attorney even went as far as to sign some of the documents himself. had several different packet agreements at closing, I haven’t a clue what he presented to the lender, not their fault 100%brokers this is where it starts. But once the lender realizes these things are happening or has happened they should step up
    to bat and correct them.

    Comment by mary rogers — May 4, 2008 @ 1:04 pm

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