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Tuesday, February 10, 2009
Why isn't anybody pointing fingers at the Mortgage Brokers?
I read in the Wall Street Journal that about half of the mortgages that have been restructured to avoid foreclosure have gone into default after only two months. Am I the only one who is not at all surprised by this news? As mortgage default/fraud investigators, our firm is tasked with verifying the information provided in the original loan applications. We have found that nearly 80% of the borrowers that purchased homes were not 0r should not have been qualifed home buyers in the first place, even in the subprime markets. In many instances, borrowers, at the urging of the "loan broker" have falsified employment, inflated income, hidden substantial liabilities and debt. In other cases, we have found that the loan brokers filled out the forms with the information needed to get the borrower qualified because the borrower didn't speak or understand English well enough to do it themself and didn't know what it was they were signing, but signed anyway because their broker told them to. In every congressional hearing I watch and newspaper I read I there are only two sides to the mortgage meltdown, the borrower side and the lending institution side. Why isn't anyone talking about the rogue loan brokers? The brokers had the most incentive to push an unqualified borrower into a loan they couldn't afford because they were paid handsomely by the lenders to do so. Typically, a broker receives a fee called a loan origination fee for placing the loan, but--and most borrowers are not aware of this--they also get an additional fee called "Yield Spread Premium," which is equal to about 1% of the loan, that is "paid outside of closing" by the Lender. The question is, where are these mortgage brokers now? I predict lying on a beach somewhere spending their fat YSP checks, while the borrowers and the banks are sinking into the abyss.