We, of The Diligence Group, usually make it our practice to steer severely clear of writing articles that do not strictly educate or inform.  Nor do write articles that have a political bent.  Today, however, is an exception.

I recently read an article about the “recently revealed” predatory lending practices of WAMU; practices that we have been exposing via our reports for some time.  According to the article, WAMU made it its mission in life to sell as many Pay Option ARMs as possible, frequently holding internal focus groups to brainstorm marketing activities, and providing additional financial rewards to loan officers who sold Pay Option ARMs to an unsuspecting and uninformed public, in abundance.

Excerpts of an article written by the Palm Beach Post state:

“One loan officer told a congressional committee last year that he expected the majority of homeowners with Option ARMs to sell or refinance before their payments increased.  That became impossible as the real estate market imploded.

Another favorite Washington Mutual loan was one that required no proof of a borrower’s earnings.  The so-called “stated-income” loans were ripe for fraud and perpetuated by rewards given to loan personnel, the report surmises.

“Because of the compensation systems rewarding volume versus quality and the independent structure of the originators, I am confident at times borrowers were coached to fill out applications with overstated incomes or net worth to meet the minimum requirements,” said Jim Vanasek, Washington Mutual’s chief risk manager during a congressional hearing last year.”

From what we at The Diligence Group have been seeing via our investigations, and hearing from homeowners, WAMU loan officers coached no-one relative to the completion of  their loan applications, but simply filled in the blanks themselves, submitted the loans to underwriting for rubber-stamped approval, and eagerly awaited with sweaty palms, the  arrival of cash upon the loans closure.  We recently performed an initial, pre analysis review for a borrower who hails from Brazil and who is a Naturalized US Citizen.  He was shocked to discover that the WAMU  loan he received was not a 30-year fixed rate product, but a Pay Option ARM that has the capacity to increase his mortgage balance to 115% of his original loan amount.  His mortgage balance has already increased over $43,000 in the five years that have elapsed since the closure of his loan, a loan balance that rises steadily with each mortgage payment he makes.  What is horrifying is that this man represents but one drop of water in a veritable sea of borrowers who were targeted, by WAMU, for predatory financing.  He has attempted to modify his loan several times and has received the same disgraceful “Who’s on First?” addle, incompetent, and nonsensical treatment as every other homeowner in America who is trying to modify their mortgage.

What this underwriter considers particularly vexing, is the apparent lack of reasonable recourse that is available to the American Mortgage Consumer, and total lack of responsible government oversight.  I mean, how is it possible that a customer who is burned by a hot cup of coffee in a McDonalds restaurant, is awarded millions of dollars in compensation for “pain and suffering,” but a homeowner who was actively lied to, targeted, and sold a loan product that was harmful by design, have no legal recourse?  Where is the requirement that right and justice prevail?

The fact that there are no government agencies overseeing the modification activities of lenders and Servicers that received Billions in TARP funds is particularly egregious.  Let us be honest, the vast majority of lenders and Servicers who were fortunate enough to remain in business,  received billions from the long suffering US taxpayer, and are legally required to follow HAMP’s modification guidelines, but are not being required to do so.  What is even more outrageous, is that Mortgage Servicers are making billions of dollars in profits because the system rewards them financially for not modifying loans, thus encouraging them to continue to run roughshod over financially distressed homeowners.  If distressed homeowners are not receiving modifications, it is certainly not due to lack of effort on the part of their attorney or modification representatives, it is because Servicers are actively permitted to get away with conduct that can only be described as heinous. 

A recent class action lawsuit alleges that a Servicer was denying modification assistance to elderly homeowners, homeowners whose sole source of income was derived from Social Security payments.  These homeowners were denied modifications because,  according to the Servicer,  the borrowers did not comply with the Servicers documentation requirements – requirements  that demanded that elderly homeowners provide audited Profit and Loss Statements, Balance Sheets and Corporate tax returns – documents that only Corporations would logically, be required to possess.  How is it that lenders, who granted these loans in the first place, had no problem receiving borrower documentation via fax, email, regular mail and express delivery, but Servicers always seem to be denying modifications to homeowners, declaring that required paperwork was not received (even after it was sent 5 or 6 times via registered mail).  Are these Servicers so disorganized and incompetent that they cannot be trusted with simple documentation?  If such is the case, how can they be trusted to successfully manage a borrower’s mortgage and escrow account? 

Clearly, the only conclusion that a reasonable person can draw, considering the widespread and very public nature of the abuse, is that the same legislators who played “see no evil, hear no evil, speak no evil” with the Financial industry are continuing to avert their eyes.  It is unfortunate that these games continue to be played at the expense of the American Homeowner and Taxpayer.  We certainly deserve more effective representation, and better solutions than this.

I encourage those of you who read this missive, to think, just for a moment, what the harvest might be to the economy, overall,  if the Federal Government mounted a serious, thoughtful, intelligent, and mandated approach to resolving the foreclosure crisis.  Not another bail out mind you, but the simple requirement that Servicers do nothing more than follow the rules and modify eligible loans.  No games, no dual tracking, no ineptitude, no dithering incompetence, or further abuses permitted.  Might not the economy actually grow?  Might not homeowners, who are being bankrupted by foreclosure and legal fees, be able to spend their money on other things, like washing machines, refrigerators, automobiles and other durable goods?  Might not home values begin to stabilize, and the housing market begin to recover?  Might not jobs begin to become available once more, and employment opportunities abound once again?  Alas, until our legislators arise one morning and decide to solve the foreclosure crisis our Nation will continue to languish, and the economic outlook for all, unless you are a Mortgage Loan Servicer or investment banker, will continue to be bleak.  It is a shame.

Until the occurrence of the miracle outlined above takes place, The Diligence Group will continue to do what it does best.  Investigate and evidence acts of predatory lending, bias, targeting, negligence, ineptitude, and deceit relative to the origination, appraisal, closure, Servicing and Securitization of mortgage loan transactions. We will continue to support Attorneys and like professionals who seek to effort Fair Housing Complaints, Class Action Suits, and Securitization claims.  While justice may not be swift, hopefully it will be realized, even if it is only realized one loan at a time.  It is simply sad that Mortgage Servicers have been permitted to take over where the Mortgage Lenders took off, and are continuing to drain the lifeblood, and exploit unabated, the American Consumer.

-FS

http://diligencegroupllc.net/

Since August 2007, which marked the beginning of the “foreclosure crisis”, MainStreet has provided guidance, direction and peace of mind to over 150 families. These families are from every walk of life and each of their mortgage situations is as unique as each individual tied to it. MainStreet Resolutions is Your Path to A Fresh Start!

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Are you in default or foreclosure?  If you suspect you have been the victim of Predatory Lending here in Florida, suspect you might be a victim of fraud, suspect the lender who provided your mortgage may have been less than honest, or may have even purposely overvalued your property in the Appraisal, please contact me, Tiffany Arthur at tiffanylarthur@aol.com or visit my website for more information at www.mainstreetresolutions.com We are interested in helping the homeowner find a permanent resolution to keep them in their home.