Showing posts with label Countrywide. Show all posts
Showing posts with label Countrywide. Show all posts

February 3, 2014

Here we go again ...

From the New York Times:
Race Gap on Conventional Loans

African-American and Hispanic borrowers have been largely shut out of the conventional mortgage market, according to a new report from Zillow and the National Urban League. Citing 2012 loan data reported under the Home Mortgage Disclosure Act, along with results from a Zillow poll of 700 mortgage applicants in December, the analysis found that whites accounted for about 69 percent of all conventional mortgage applications. The share of applications filed by blacks was under 3 percent; Hispanics represented only 5 percent.

100 - 69 - 3 - 5 = 23% of new conventional mortgages going to whom?
Black and Hispanic borrowers are far more likely to apply for low-down-payment loans insured by the Federal Housing Administration. About 57 percent of black applicants and 60 percent of Hispanic applicants applied for F.H.A. loans, compared with 30 percent of white applicants. 
Access to financing that requires as little as 3.5 percent down is key for minority applicants, who on average have lower incomes and credit scores than whites, said Stan Humphries, Zillow’s chief economist. They also have far lower rates of homeownership, which makes it harder to accumulate wealth over time and across generations. “Higher down-payment requirements have had the biggest impact on minority applicants for conventional mortgages,” Mr. Humphries said. “They just don’t have the savings nonminority groups have.” 
And their conventional mortgage applications are more likely to be denied. One in four black applicants were turned down, compared with one in 10 white applicants, the report said. 
As conventional lending standards have tightened, F.H.A.-backed loans have become crucial to maintaining credit access in minority communities. But at the same time, Mr. Humphries said, F.H.A.’s dominance among such borrowers hints at a problematic trend: “a different path to financing based on your race and ethnic group.” 
And the F.H.A. path can be costly. Although F.H.A.-backed loans offer the initial advantage of less money down, their mortgage insurance premiums are considerably higher than premiums on conventional loans. 
Julia Gordon, the director of housing finance and policy at the Center for American Progress, a liberal research group, has concerns about what she calls “the dual housing market,” and says she believes the conventional market ought to be making lower-down-payment loans more widely available. “Like all the other separate-but-equal arrangements,” she said, “this is not good for consumers or the market or for taxpayers. We are seeing creditworthy people who should be able to get loans in the conventional market but can’t.” 
Ongoing discussions in Washington about how to wind down Fannie Mae and Freddie Mac should include a commitment to ensure that lenders make credit available equitably, she added. 

With apologies to Wordsworth and Milton:

                     Las Vegas, 2014
MOZILO! thou shouldst be lending at this hour:
    Exurbs have need of thee: they are a fen
    Of prudent finance: kitchen, bath, and den,
Fireplace, the heroic wealth of marble shower,
Have forfeited their late-lost subprime dower
    Of higher leverage. We are low-debt men;
    O raise us up, return to us again,
And give us zero down liar loan power!
Thy face was like an Orange, and golfed a lot;
    Thou hadst a voice whose sound was like TV:
    Pure flapdoodle, correct politically,
    So didst thou at Sherwood Country Club play,
In devout PCness; and yet thy stock
    The lowest return on investment did pay.
 
Here's the original:

                     London, 1802
MILTON! thou shouldst be living at this hour:
    England hath need of thee: she is a fen
    Of stagnant waters: altar, sword, and pen,
Fireside, the heroic wealth of hall and bower,
Have forfeited their ancient English dower
    Of inward happiness. We are selfish men;
    O raise us up, return to us again,
And give us manners, virtue, freedom, power!
Thy soul was like a Star, and dwelt apart;
    Thou hadst a voice whose sound was like the sea:
    Pure as the naked heavens, majestic, free,
    So didst thou travel on life's common way,
In cheerful godliness; and yet thy heart
    The lowliest duties on herself did lay.
         

October 24, 2012

I am shocked, SHOCKED to learn that Countrywide Financial's loan practices were lax

Here's the top story in the Washington Post right now:
US suit cites ‘brazen’ mortgage fraud at Countrywide, even after Bank of America purchase 
By Associated Press, Updated: Wednesday, October 24, 2:15 PM 
NEW YORK — The latest federal lawsuit over alleged mortgage fraud paints an unflattering picture of a doomed lender: Executives at Countrywide Financial urged workers to churn out loans, accepted fudged applications and tried to hide ballooning defaults. 
The suit, filed Wednesday by the top federal prosecutor in Manhattan, also underscored how Bank of America’s purchase of Countrywide in July 2008, just before the financial crisis, backfired severely. 
The prosecutor, Preet Bharara, said he was seeking more than $1 billion, but the suit could ultimately recover much more in damages. 
“This lawsuit should send another clear message that reckless lending practices will not be tolerated,” Bharara said in a statement. He described Countrywide’s practices as “spectacularly brazen in scope.” 
He also charged that Bank of America has resisted buying back soured mortgages from Fannie Mae and Freddie Mac, which bought loans from Countrywide.

A relevant fact that has disappeared down the memory hole is that during the Housing Bubble, Angelo Mozilo, CEO of Countrywide, kept boasting that Countrywide was going hog wild in the name of increasing minority homeownership. For example, here's a press release from January 2005. (I suspect that this immediately followed a meeting between Mozilo and Daniel Mudd, head of Fannie Mae, in which Fannie agreed to buy more mortgages from Countrywide).
Countrywide sets $1 trillion goal for real estate loan program 
Funding aims to help minority, low-income borrowers 
BY INMAN NEWS, FRIDAY, JANUARY 14, 2005.

Countrywide Home Loans today announced an expansion of its We House America initiative to fund $1 trillion in home loans to minorities and lower-income borrowers and communities through 2010. 
"The $1 Trillion We House America Challenge, expanded from $600 billion announced in 2003, embodies Countrywide's long-standing commitment to lead the mortgage industry in closing the home-ownership gap for minority and lower-income families and communities," said Angelo Mozilo, Countrywide Financial Corp. chairman and CEO, who announced the initiative at the International Builders' Show in Orlando. 
"For several years now, Countrywide has been a leading lender to minorities and lower-income households," Mozilo said. "I am proud of our lending record and pleased to announce the expansion of our lending commitment to $1 trillion." The We House America program has already placed 2.4 million families into homes, Mozilo said that number should nearly triple by 2010. 
The company will continue to develop innovative programs emphasizing non-traditional lending criteria, according to the announcement, such as calling for improved underwriting systems that eliminate the over-reliance on traditional credit scores that can mask a borrower's true credit-worthiness. 
Countrywide last year launched Optimum Loan, a program that addresses obstacles for hard-to-qualify borrowers, such as allowing for non-occupant co-borrowers, other secondary income, and pooled funds for down payments. ...
"To ensure that this objective is achieved, we intend to expand upon our existing partnerships with specific community groups," Mozilo said.
Henry Cisneros, a Countrywide director and a former secretary of Housing and Urban Development, said, "This company is leading the industry in closing the homeownership gap through ambitious lending commitments, innovative programs, and a strong corporate culture that constantly looks for ways to improve." 
Countrywide formalized its commitment to affordable lending more than a decade ago by launching We House America, an initiative to provide increased homeownership opportunities for all Americans. The previous commitment covered the years of 2001-10 and has provided $341 billion of home loans as of Dec. 31, 2004. The company is now extending the goal to $1 trillion by 2010.

And back in February 2003, Mozilo had given a well-publicized Harvard address pledging $600 billion (with a B) in minority and low income mortgages in support of President Bush's October 15, 2002 call for closing the racial gap in homeownership by freeing up lenders from discriminatory regulations like insisting upon down payments.

And Mozillo had been demanding deregulation in the name of minorities from nine years before that, when Cisneros and the Clinton Administration threatened Countrywide with having the Community Reinvestment Act, with all its paperwork, extended to non-bank mortgage lenders like Countrywide if they don't start lending more to minorities:
Eased guidelines seen as key to boost in minority lending 
AUTHOR(S) Prakash, Snigdha
PUB. DATE October 1994
SOURCE American Banker; 10/13/1994, Vol. 159 Issue 198, p20 ... 
ABSTRACT Presents the guidelines outlines by Angelo Mozilo, chairman of Countrywide Funding Corp. regarding loans awarded to minority borrowers. Recommendation for the Federal National Mortgage Association (Fannie Mae) and Federal Home Loan Mortgage Corp.to loosen underwriting guidelines; Presentation of the guidelines during a speech delivered to the Mortgage Bankers Association.

The central thread in the Housing Bubble / Bust was excessive deregulation in the name of increasing minority lending. This all did a lot more for Angelo Mozilo's net worth than it did for minorities' net worth, but, there are simply no interest groups in America who want to hear what really happened. Everybody wants to promote their ideologically congenial fragment of the full story.

Sure, trillions evaporated and trillions may evaporate again in the future because nobody wants to learn this lesson of history, but I guess that's a small price to pay for keeping the embarrassing truth covered up.