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Countrywide Whistleblower Details Systemic Fraud

Subprime Lending

Image by sabeth718 via Flickr

Via The Business Insider.

60 Minutes had a nice segment reported by Steve Kroft this Sunday.

The reporting makes clear that the notion that the Community Reinvestment Act (CRA) caused the subprime mortgage debacle is getting more and more ridiculous.

Eileen Foster was a senior executive at Countrywide Financial before the bubble burst.

On the program, Foster, who was in charge of finding and investigating fraud at Countrywide, said, “from what I saw, the types of things I saw, it was — it appeared systemic. It, it wasn’t just one individual or two or three individuals, it was branches of individuals, it was regions of individuals.”

It appears there was a gold rush on for selling as much “product” up the chain in the casino that was the deregulated derivatives market.

In overstuffed recycling bins she says she found signatures that had obviously been cut and pasted from old paperwork onto new mortgage documents — an obviously fraudulent practice.

Describing an environment in which employees were encouraged to process bad loans, she provides motive for what drove the systemic corruption:

“The loan officers received bonuses, commissions. They were compensated regardless of the quality of the loan. There’s no incentive for quality. The incentive was to fund the loan. And that’s — that’s gonna drive that type of behavior.”

Yeah. No mention of the poor people and minorities forcing them to make bad loans.

-Chris

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December 6, 2011 - Posted by | Economics, Politics, Uncategorized, Wall Street | , , , , , , ,

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