(10 am. – promoted by ek hornbeck)
In 2007, mortgage lender Countrywide Financial Corp underwent a series of Class Action Lawsuits in a number of States. One, in Illinois, was settled in October of 2008 after Countrywide’s acquisition by Bank of America, who chose to settle out of court.
Still, others pending as of February 27th, 2008, were not only suing over subprime loans and hidden balloons, but “reaping profits from “inflated, unverifiable or false” charges.”
According to the lawsuit, Countrywide frequently charges $300 to $500 for appraisals that are not done at all, or that are mere “drive-by” inspections by appraisers who don’t even stop their cars when passing mortgaged properties.
Countrywide has $300 to $500 “flat-fee” arrangements with law firms that handle foreclosures, the lawsuit says. Yet it hits homeowners with legal bills of $1,200 to $2,0000.
I have relatives directly involved in one such suit here in Michigan. After making two late payments (but each within 30 days) sudden inexplicable charges showed up in their mortgage. They were assessed an additional $400.00 a month for an “escrow” account on their loan. An escrow account with no discernible purpose. They paid both their taxes and their insurance independently of that loan.
They were told once they had one full house payment secured in that account, the charges would be dropped. After several months, the charges went up, not down. There were all kinds of “fees” attached, and they increased the interest rate on what was written as a fixed loan.
Rather than continue to argue with them monthly, they just stopped paying, and walked away from their home.
So what do you do when you are caught stealing billions of dollars? Change your name and steal more.
Let me introduce you to the new Countrywide: Private National Mortgage Acceptance Company.
Known as PennyMac and led by Stanford Kurland, the firm is paying an average of 30 cents to 50 cents on the dollar for the loans and the FDIC is sharing some of the risk, spokesman Andrew Chang said. He declined to provide more details beyond a statement today from the Calabasas, California-based company.
The purchase may enable Kurland, who benefited from the real estate boom, to also profit from the market’s bust. Kurland joined Countrywide in 1979 and was a candidate to succeed former Chief Executive Officer Angelo Mozilo. Regulators blamed lax lending by Countrywide, the biggest U.S. home lender, for contributing to the mortgage market’s collapse, and the company was sold to Bank of America Corp. in July after running short on cash. Kurland departed in 2006.
Last March NPR reported on this, referring to them as “Bottom Feeders” in this 3 minute overview. I strongly suggest listening to them.
Yesterday, the New York Times ran an article, using the same analogy I used yesterday about fire sales and arsonists. Great minds think alike.
“It is sort of like the arsonist who sets fire to the house and then buys up the charred remains and resells it,” said Margot Saunders, a lawyer with the National Consumer Law Center, which for years has sought to place limits on what it calls abusive lending practices by Countrywide and other companies.
The NYT article delineates how they are buying, for pennies on the dollar, (Hence the Moniker) bad loans from banks, such as the ones they once wrote.
I will simplify and abbreviate:
You have a loan for 400k that is in default with Bank “A”.
Penny Mac buys that bad loan for LITERALLY pennies on the dollar. They pay Bank “A” (being generous in my usage of 10%) 40k for that mortgage.
Penny Mac renegotiates with you, the homeowner to rewrite your 400k loan, at as little as 3%.
Bank “A” gets rid of a bad loan, and makes 40k.
Penny Mac makes 360k right off the top, before interest.
You are essentially happy you can stay in your home.
You never realize that Countrywide sold you the bad loan in the first place, before it was repackaged and resold a dozen times between lenders.
However, many are enraged as what they see as a circular, and intentional transferal of debt between unethical lenders for the impure motive of profiteering.
“Kurland is seeking to capitalize on a situation that was a product of his own creation,” said Blair A. Nicholas, a lawyer representing retired Arkansas teachers who are also suing Mr. Kurland and other former Countrywide executives. “It is tragic and ironic. But then again, greed is a growth industry.”
Worse yet? (same source) They are now making deals with FDIC.
Its biggest deal has been with the Federal Deposit Insurance Corporation, which it paid $43.2 million for $560 million worth of mostly delinquent residential loans left over after the failure last year of the First National Bank of Nevada. Many of these loans resemble the kind that Countrywide once offered, with interest rates that can suddenly balloon. PennyMac’s payment was the equivalent of 38 cents on the dollar, according to the full terms of the agreement.
Under the initial terms of the F.D.I.C. deal, PennyMac is entitled to keep 20 cents on every dollar it can collect, with the government receiving the rest. Eventually that will rise to 40 cents.
If you want to listen to “The Takeaway” radio broadcast yesterday about this NYT article the link is here:
This is not so much a collapse, anymore.
I have come to believe it was a well-orchestrated effort to both force the government to give them more funding, all while making the government indebted to the Banks themselves.
It is the Ponzi scheme to beat all Ponzi schemes. The rich get richer.
We get fucked.