A lot of people have believed that Countrywide (NYSE:CFC) could not have come by all of those profits during the last few years without looking the other way on some loans. Indeed, according to The Wall Street Journal, "A federal probe of Countrywide, the nation's largest mortgage lender, is turning up evidence that sales executives at the company deliberately overlooked inflated income figures for many borrowers."
In the cases of may of these mortgages, borrowers did not have to show proof of income or tax returns.
The FBI, which has been looking into all of this, believes that there was some fraud in the level of income loan officers reported that their clients had. That would make getting a mortgage easier, assuming the lender lied in the right direction.
The probe also raises the question of whether Countrywide had to say something about these loans and their problems in its public company filings.
These investigations always go the same way. The government finds that some mid-level people played fast and fancy with the rules. Then they want to know how far up the chain the practice was approved.
Maybe some people in the Countrywide executive suite are sweating.
Douglas A. McIntyre is an editor at 247wallst.com and author of the Ten Stocks Under $10 Letter.
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Reader Comments (Page 1 of 1)
4-30-2008 @ 11:00AM
hopflcd said...
The executives should be sweating because of terrible lending practices, with no asset or income checks, lousy appraisals, etc. which resulted in high income for the company, and more importantly, high bonuses and perks. Probably as bad, or worse, is their collection policy, adding unjustified fees, losing checks, sending foreclosure letter and starting foreclosure procedures without justification in many instances, and having one available for the borrower to call. This is a pure example of a company run solely for the insiders.
4-30-2008 @ 11:18AM
am said...
What else is new? Seems we are in a pervasive culture or me, me, me, whatever gets me the cash. American business needs consider the overall impact to the country, not just their bottom line.
4-30-2008 @ 1:23PM
Americas Watchdog said...
Great Blog Doug;
We have the National Mortgage Complaint Center & we think the FBI will hit gold in their investigation. We also know for a fact that CFC was having sales contests to see who could sell the most pay option adjustable rate mortgages. The pay option mortgage came with lots of profits, but they also came with lots of risks. CFC ignored the risks and and went for the profits.
But sad to say.......CFC was not the only lender involved. Washington Mutual was pushing appraisal values (New York Attorney General). Everyone had an angle. Our big worry is that Wall Street thinks everything is coming up roses..........with the real estate/mortgage mess soon to be behind us all. Its a pipe dream.
With respect to FBI investigations we hold out little hope of anyone going to jail. CFC and most other big banks have lots of bought & paid for friend in Congress. We think the worst that will come of the worst US real estate disaster (ever) is the tax payers will be left holding the bag.