A state court judge has ruled that Illinois can move forward with a lawsuit alleging that Wells Fargo & Co. steered minority borrowers into risky mortgages at the height of the housing bubble. Important to note the court DID NOT find that Wells Fargo engaged in discriminatory lending but the Illinois action is the first fair-lending lawsuit brought by a state attorney general against a national bank to reach discovery, attorneys familiar with the case said. After discovery, Illinois may be able to bring the case to trial. We believe this is a poor decision.
Here are the underlying issues and possible ramifications for this. ALL residential mortgage lenders (BofA, Wells Fargo, Chase, Ally Bank even Efinity for that matter) had and have annual requirements and goals for community lending. Ten years ago, the push from Fannie Mae and Freddie Mac were to grow minority ownership. This was a directive from prior US President Bill Clinton during his presidency (1993-2001). A challenging task as these markets historically have been plagued with on-going credit and down payment issues. The "steering" as referred by the Illinois state attorney general will be difficult to defend as home loan underwriting requirements were much less focused on standard automated underwriting findings and subject to interpretation. Many of the loan programs available to mortgage lenders at the time were very lenient on income and employment documentation compared to the standard FHA loan programs. In addition, programs typically offered short term fixed payment durations lowering the starting rate and payment which many borrowers were attracted to. Add the year over year property increase assumptions, these underwriting decisions are now deemed discriminatory. Furthermore, what will be difficult to defend is the reasoning why those loan programs were selected. In many circumstances, borrowers fully intended to flip or move in a short time window making short term fixed duration loans preferable as the interested rates were significantly lower. Adding to the lack of clarity behind these transactions in question, no where within the application explains or supports the reasoning behind the transaction.
WF was "gently" pushed to lend in certain markets which conventional lending could and would not support. The transactional volume requirements demanded certain products which were available to the market place. Unfortunately while clients are usually always made aware of the risks associated with an adjustable mortgage product the purchase decision is usually made payment. Are there individual transactions where perhaps the risk/rewards were not fully vetted out 100%, perhaps but in this instance we believe individual borrowers are not taking personal responsibility for their decisions.
Showing posts with label Countrywide. Show all posts
Showing posts with label Countrywide. Show all posts
Thursday, November 3, 2011
Thursday, October 30, 2008
Feds probe Countrywide's 'V.I.P.' program
By Lisa Myers & Amna Nawaz, NBC News
The wide-ranging criminal investigation into wrongdoing at Countrywide - once the nation's largest mortgage originator - now includes serious scrutiny of a loan program that provided special mortgage deals to the well-connected and powerful, including two U.S. senators.
NBC News has learned that Robert Feinberg - a former Countrywide loan officer who handled what were known as the "V.I.P." mortgages - spent six hours last Thursday with a six-person team from the Justice Department. The team included prosecutors from the Public Integrity section, which handles investigations of possible public corruption.
"The Justice Department is making very serious inquiry into any possible wrongdoing that may involve (former Countrywide CEO) Angelo Mozilo, other Countrywide employees, Sen. Chris Dodd, Sen. Kent Conrad, (former Fannie Mae CEO) Franklin Raines or other public officials," said Feinberg's lawyer, Anthony Salvano. "Robert has always cooperated thoroughly with authorities and is strictly a witness in their investigation."
'Friends of Angelo's'Salvano said the prosecutors and FBI agents seemed focused on whether the preferential treatment given to V.I.P. customers was part of an effort by Countrywide to buy influence - as well as on the conduct of each public official who received a mortgage from Countrywide.
Feinberg says that Countrywide's clients in this program were known by a nickname.
"We called them F.O.A.'s," Feinberg told NBC News, "which were Friends of Angelo's."
"Angelo" is Countrywide's then-CEO, Angelo Mozilo, who once called an ordinary borrower's plea for help on his mortgage payments, "disgusting."
But Mozilo seemed to have a different attitude toward people of influence. In fact, Feinberg says part of his job was to hammer home to the V.I.P. clients that they were getting special deals.
"You spoke in a manner that was different than you spoke with a regular customer," said Feinberg. "'Your loan has been specially priced by Angelo.' 'You're getting special discounts because you're in the V.I.P. loan department."
So what would a "Friend of Angelo" get that an average customer would not? According to Feinberg, the possible benefits ran the gamut.
"They got a discount on the interest rate," said Feinberg. "They got discounts on their fees. They got a free floatdown option before closing."
In one instance of a "Friends of Angelo" deal, Mozilo sent an e-mail to Feinberg ordering him to "Take off one point" on a loan to Sen. Conrad. That one point equaled a savings of $10,700 in fees.
Feinberg's client list also runs the gamut. Among those benefitting from the VIP program were four former Cabinet members spanning Democratic and Republican administrations: Henry Cisneros, Richard Holbrooke, Alphonso Jackson, and Donna Shalala. Two former CEO's of Fannie Mae, James Johnson and Franklin Raines, heads of the government-sponsored entity which bought Countrywide's mortgages - also received VIP mortgages from Countrywide.
All have denied impropriety and declined to elaborate to NBC News. Some say they had no idea they were getting favorable rates or any sort of discount. But Feinberg insists part of his job was to make clear to VIP's they were receiving special treatment. "There were many, many taglines we used to let them know their level of importance to make sure that they understand where they're located," said Feinberg. "And nine times out of ten, once you mention 'V.I.P' the person's gonna ask you 'what am i getting for being in this V.I.P department?' Or 'what am I getting because I know Angelo?' Or 'I talked to Angelo and he said I'm getting this.'"
Senator Conrad says he never asked for, expected, nor was aware of any special treatment from Countrywide, and only found out about the discount after it had been reported in the press. He released and posted to his website all his mortgage documents, and donated all the money he saved to Habitat for Humanity.
Senator Dodd says he thought the VIP program just meant better customer service, and that he received market terms that he could have received from other lenders. The senator said in a press conference on the matter that if anyone had suggested at the time that he was receiving some kind of financial benefit on the loans because of his position, he would have terminated the relationship immediately.
Both Conrad and Dodd say they never sought any favors, and are cooperating with the Senate Ethics Committee investigation. Feinberg says he's not aware of any discounts linked to favors, but he did see e-mails noting the potential value of the relationships to Countrywide's political and business interests. The e-mails noted one particular client was "of importance to Countrywide." Another encouraged a discount, noting "they are incredibly important to us." Yet another asked that the loan officer, "make an exception" in Countrywide's lending rules, "due to the fact that the borrower is a Senator."
Daniel Golden investigated the program for Condé Nast's Portfolio magazine.
"There was a great variety of people who got special deals," said Golden. "Many of them were figures in Congress or government or business partners of Countrywide - all of whom were in a position to help Countrywide in one way or another." To Golden, the company's intention was clear.
"The purpose for Countrywide was to ingratiate itself with the people in Washington who might be able to help the company down the road," said Golden.
But was any of it illegal? Legal experts say prosecutors will be looking into whether Countrywide was trying to buy influence, and into whether public officials were taking improper gifts, or gifts they should have disclosed.
The wide-ranging criminal investigation into wrongdoing at Countrywide - once the nation's largest mortgage originator - now includes serious scrutiny of a loan program that provided special mortgage deals to the well-connected and powerful, including two U.S. senators.
NBC News has learned that Robert Feinberg - a former Countrywide loan officer who handled what were known as the "V.I.P." mortgages - spent six hours last Thursday with a six-person team from the Justice Department. The team included prosecutors from the Public Integrity section, which handles investigations of possible public corruption.
"The Justice Department is making very serious inquiry into any possible wrongdoing that may involve (former Countrywide CEO) Angelo Mozilo, other Countrywide employees, Sen. Chris Dodd, Sen. Kent Conrad, (former Fannie Mae CEO) Franklin Raines or other public officials," said Feinberg's lawyer, Anthony Salvano. "Robert has always cooperated thoroughly with authorities and is strictly a witness in their investigation."
'Friends of Angelo's'Salvano said the prosecutors and FBI agents seemed focused on whether the preferential treatment given to V.I.P. customers was part of an effort by Countrywide to buy influence - as well as on the conduct of each public official who received a mortgage from Countrywide.
Feinberg says that Countrywide's clients in this program were known by a nickname.
"We called them F.O.A.'s," Feinberg told NBC News, "which were Friends of Angelo's."
"Angelo" is Countrywide's then-CEO, Angelo Mozilo, who once called an ordinary borrower's plea for help on his mortgage payments, "disgusting."
But Mozilo seemed to have a different attitude toward people of influence. In fact, Feinberg says part of his job was to hammer home to the V.I.P. clients that they were getting special deals.
"You spoke in a manner that was different than you spoke with a regular customer," said Feinberg. "'Your loan has been specially priced by Angelo.' 'You're getting special discounts because you're in the V.I.P. loan department."
So what would a "Friend of Angelo" get that an average customer would not? According to Feinberg, the possible benefits ran the gamut.
"They got a discount on the interest rate," said Feinberg. "They got discounts on their fees. They got a free floatdown option before closing."
In one instance of a "Friends of Angelo" deal, Mozilo sent an e-mail to Feinberg ordering him to "Take off one point" on a loan to Sen. Conrad. That one point equaled a savings of $10,700 in fees.
Feinberg's client list also runs the gamut. Among those benefitting from the VIP program were four former Cabinet members spanning Democratic and Republican administrations: Henry Cisneros, Richard Holbrooke, Alphonso Jackson, and Donna Shalala. Two former CEO's of Fannie Mae, James Johnson and Franklin Raines, heads of the government-sponsored entity which bought Countrywide's mortgages - also received VIP mortgages from Countrywide.
All have denied impropriety and declined to elaborate to NBC News. Some say they had no idea they were getting favorable rates or any sort of discount. But Feinberg insists part of his job was to make clear to VIP's they were receiving special treatment. "There were many, many taglines we used to let them know their level of importance to make sure that they understand where they're located," said Feinberg. "And nine times out of ten, once you mention 'V.I.P' the person's gonna ask you 'what am i getting for being in this V.I.P department?' Or 'what am I getting because I know Angelo?' Or 'I talked to Angelo and he said I'm getting this.'"
Senator Conrad says he never asked for, expected, nor was aware of any special treatment from Countrywide, and only found out about the discount after it had been reported in the press. He released and posted to his website all his mortgage documents, and donated all the money he saved to Habitat for Humanity.
Senator Dodd says he thought the VIP program just meant better customer service, and that he received market terms that he could have received from other lenders. The senator said in a press conference on the matter that if anyone had suggested at the time that he was receiving some kind of financial benefit on the loans because of his position, he would have terminated the relationship immediately.
Both Conrad and Dodd say they never sought any favors, and are cooperating with the Senate Ethics Committee investigation. Feinberg says he's not aware of any discounts linked to favors, but he did see e-mails noting the potential value of the relationships to Countrywide's political and business interests. The e-mails noted one particular client was "of importance to Countrywide." Another encouraged a discount, noting "they are incredibly important to us." Yet another asked that the loan officer, "make an exception" in Countrywide's lending rules, "due to the fact that the borrower is a Senator."
Daniel Golden investigated the program for Condé Nast's Portfolio magazine.
"There was a great variety of people who got special deals," said Golden. "Many of them were figures in Congress or government or business partners of Countrywide - all of whom were in a position to help Countrywide in one way or another." To Golden, the company's intention was clear.
"The purpose for Countrywide was to ingratiate itself with the people in Washington who might be able to help the company down the road," said Golden.
But was any of it illegal? Legal experts say prosecutors will be looking into whether Countrywide was trying to buy influence, and into whether public officials were taking improper gifts, or gifts they should have disclosed.
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