Bank of America - talk about an irresponsible re loan.

[leftyladyfrommo]

I was just talking to one of my customers. She is being foreclosed on by Bank of America. When she was 23 they made her a 75/25 (100% 1st and 2nd combo) with a stated income that was higher than her salary. Now she is $30,000 under water on her house. Then they were going to do a modification for her but decided against it - decided just to sell the house. She has been trying to sell the house for months but no takers - I'm sure she is having to ask way more than the house is worth.

She ought to sue Bank of America for making her this loan. I know that borrowers need to be responsible. But it is the bank underwriter's that are responsible for these loans. It's their job to be sure people can afford the loan. The bank should have to eat this loan without ruining the borrower's credit rating.

[sinkingfeeling]

1. What in the world possess anyone to believe they can 'buy' anything without putting something in the

pot? I know that almost every couple or single person on HGTV's 'My First Place' closed on some 75/25 or 80/20 combo loans with ridiculous monthly payments and just wonder how many still have the places today.

[Lance_Boyle]

2. So she committed fraud on the loan application

by giving a stated income that was unrealistically inflated? How and why should she be absolved of her responsibility? Maybe the bank decided against modifying the loan on the basis that they have been burned once by this person.

[rd_kent]

4. +10

[Hello_Kitty]

7. Then the bank should have turned her in for fraud rather than giving her a mortgage, no?

Did they not aid and abet her in committing this fraud? Was it not their responsibility to determine her income by carefully reviewing her pay, banking, and credit records? To whom do we grant the licenses and place into positions of trust and authority, bankers or home buyers?

[cbdo2007]

13. Maybe the bank didn't know. Why would she lie on the loan application

if they were going to check her pay stubs and stuff, unless she forged those as well?

There's more going on here. Sounds like she lied to them about her income.

[Hello_Kitty]

17. You cannot be serious.

Forged pay stubs? Really? Were you asleep or living under a rock from 2002 to 2006? Banks were giving inflated mortgages to everyone with a pulse. There were a few unscrupulous house flippers but for the most part it was the banks who were pushing the bad loans. And they were the ones who designed the bad loans in the first place!

Jesus God.

[Warpy]

20. She had to have gone through a mortgage company

and a lot of them were engaged in obvious fraud, especially when it became obvious the housing bubble was about to burst.

She padded her income because some eager beaver told her that's how it was done and besides she could expect raises every year, right? It would all average out in the end!

Bank of America expected these bastards to be doing their jobs and bought her loan.

Now they're protecting those assholes in Countrywide who committed the worst fraud of all, checking neither pay stubs nor properties, just taking the commission on every bad loan they wrote up and sold and running.

The fact that no one has gone to prison over fraudulent loans like your friend's and some that were even worse (written for no income) is very telling.

[leftyladyfrommo]

46. I think BofA may have originated their own loans.

I was in mortgages for 30 years. This is the bank's fault. No one in their right mind would make a 100% loan with inflated stated income to a 23 year old. And the value of the house was probably also inflated by the appraiser.

Everyone wss in such a hurry to make those commissions on these deals. Those loan officers were pushing these things thru just as fast as they could.

[Hannah Bell]

21. "the bank didn't know" - lol. they know what you ate june 13, 2007, but they don't know your income

right.

they know everything. they didn't care, because they wanted the fees & cash flow for their own purposes.

[cbdo2007]

25. Hey folks - I'm all for holding the banks accountable for bad loans, This is just a bad example.

Regardless of what the bank says, she inflated her income on the loan documents to get approved for more house than she could afford. Whether they gave her the loan anyway or not, she had no business buying a house she couldn't afford, lying about her income, and then not being able to make the payments.

She must have realized within a few months of getting the loan that she couldn't make her monthly payments. The blame in this instance has got to fall to both parties.

I could go out and buy a $1,000 tv today at Best Buy and they would be happy to sell it to me. Out of both parties though, I'm the only one that knows that it's my mortgage payment this month and that if I buy the tv I won't be able to make my mortgage payment.

[Hello_Kitty]

28. How do you know she was the one who inflated her income on the form?

We know that agents were the ones doing that on at least some mortgages.

And, why would mortgage cos. create these types of "stated income" loans in the first place since they are so ripe for fraud?

[Hassin Bin Sober]

36. I would bet my left arm it was the Loan Officer who inflated her income for her.

The customer very rarely understands what or how much income it takes to qualify for a mortgage loan. In short, they have no idea HOW to lie.

I'm in the business. I know it for a fact. We had VPs from the big lenders, Citi comes to mind, in our office schooling us on how to inflate 'stated' income. Their advice was to use salary.com to not go too overboard and make it "believable"

We run/ran a pretty clean shop and my boss was/is pretty conservative and paranoid about having to buy a fraud loan back but we still had a couple shady characters who did mostly stated loans. When the availability of those loans went away so did those LOs.

There were true 'stated' loans (where the lender didn't reserve the right to independently verify income by pulling a IRS 4506 request for tax transcripts) and there were 'stated' loans were the lender reserved the right. We were told to always stick with the non-4506 loans. We were MOSTLY encouraged, due to my boss' conservative nature, to use the "no income" loans where you didn't place anything in the income box.

I can count on one hand the number of stated loans I did. They were for self employed people with excellent credit and down payment who didn't want to be bothered with producing business and personal returns.

[Statistical]

52. She had to sign HUD application in which she states the information is factually correct.

She lied about her income. Period.

If you make $50K a year a sign a paper that says you make $60K a year it doesn't take a lawyer to know you are doing something wrong.
If the house payment (w/ escrow) is 40% of your fake income which is 60% of your real income you have to know that is bad & risky.

IS BofA partially to blame? Hell yeah and they likely will lose thousands in foreclosure process.

However if she not lied about her income she wouldn't be getting foreclosed right now.
Likely she would have either rented a few more years or bought a smaller home.

[Hannah Bell]

15. uh - hello? fiduciary responsibility, hello? banks have the means to check &

are mandated to check, so if they didn't, it's because they didn't give a rip.

it's pretty well documented it was policy to generate as many loans as they could, to anyone they could, for as much as they could, up to & including falsifying information.

[taught_me_patience]

22. Stated loans mean they don't check income.

Stated is exactly that - stated income w/o verification. At that time, they didn't give a rip, because if the home foreclosed, they would take it back and sell it on the market. Both the bank and the consumer made poor decisions. She should walk from the house (ruining her credit) and the bank should eat the losses.

[Hannah Bell]

38. They had the *means* & mandate to check income. Giving out "stated" loans was their

decision, & the rationale underlying the decision was to generate as many loans as possible, *knowing* many wouldn't be good.

[leftyladyfrommo]

48. The whole reason for the "state" income was to get people in who

couldn't verify enough income to get the loan. Or people who hadn't been on the job for at least 2 years. Or people who just wanted to buy a bigger house than they could afford on paper - people who don't declare all of their income.

[Hello_Kitty]

23. Oh no, we mustn't blame the poor widdle banks!

The entire collapse of the global economy is the fault of irresponsible Americans with high school diplomas making $30,000 a year who were duped by fast talking mortgage loan agents into signing complex documents no one can understand. :sarcasm:

And don't you just love how people here ASSume she was the one who put the inflated income on the form? It's well documented that a lot of agents were putting higher incomes on the form, unbeknownst to the consumer. That could well be what happened here.

[taught_me_patience]

26. But she knows her income and the payment

and makes the final decision on whether to purchase.

[Hello_Kitty]

30. And the bank makes the final decision to give her the loan.

We can go around and around forever but my point is still that it's the banks who have the licenses, authority, and positions of trust. In other professions people lose their licenses and go to jail for aiding and abetting fraud. Why should banks be any different?

[leftyladyfrommo]

49. Its an underwriter's job to be sure people can afford the payment.

When FNMA and Freddie started with the stated income loans it was a way to get around the regulations. They knew exactly what they were doing. And it was a disaster.

[napi21]

18. I obviously don't know her cae, but there have been thousands of

mtg. brokers who inflated the income of the borrower JUST to get the loan approved! If that was the case here, the broker is at fault, not the borrower or the lender.

[Lance_Boyle]

24. If the borrower signed the documents with the inflated "stated income," she committed fraud

regardless of how the lender may or may not have urged her to do so. Grown-ups are supposed to know that it's wrong to lie on a loan application, even when the person signing on the other line says "aw! c'mon!"

[Hello_Kitty]

32. And people who are given licenses and put in positions of authority

Should not aid, abet, or encourage fraud, should they? Or perhaps they should lose those licenses and face harsher penalties than the people they urged to commit the fraud since they are (supposedly) bound by a professional code of ethics and fiduciary responsibility?

[FarCenter]

42. What license? In many states mortgage brokers are not licensed.

In Florida, a significant fraction of them had felony records.

[Hello_Kitty]

44. Good point. In AZ they are licensed but there's no teeth in the enforcement.

But whatever institution they work for is licensed, chartered, and bound by a code of ethics. While regulations on the kinds of loans they could offer were relaxed, the laws against fraud weren't.

[FarCenter]

45. Like CountryWide?

[SOS]

57. Another instance of fraud:

"Yet even by WaMu’s relaxed standards, one mortgage four years ago raised eyebrows. The borrower was claiming a six-figure income and an unusual profession: mariachi singer.
Mr. Parsons could not verify the singer’s income, so he had him photographed in front of his home dressed in his mariachi outfit. The photo went into a WaMu file. Approved."

http://www.nytimes.com/2008/12/28/business/28wamu.html

Check out the linked article. It is a stunning look at the criminal enterprise formerly known as Washington Mutual.
If a bank uses "standards" like the examples in this article, who's really committing fraud?

[Hello_Kitty]

3. Americans need to stop worshipping rich people first.

Many middle class Americans are still in a strange form of denial where they'd rather blame a woman who is losing her house than the people who were put in positions of trust and violated them by committing fraud against her. And mark my words, there will be DUers along soon to wag their fingers and cluck their tongues over this young woman's "irresponsibility".

[rd_kent]

5. Americans need to stop acting like rich people first.

Live within your means. Dont spend more than you earn. Life is not MTV Cribs and Housewives of Atlanta.......

[Hello_Kitty]

8. Lovely dogwhistle there

Adds an extra special touch to your venal cruelty.

[rd_kent]

16. Really? Cruelty? WTF?

What is wrong with my statement? Is that BAD advice? Is that not a good idea?

[leftyladyfrommo]

53. Sorry. This was a little, tiny 3 bedroom bungalo in an old area.

This was just about as small a house as you can find. Probably built early 60's. It is probably worth about $80,000 right now - maybe less now that values have dropped.

[Wapsie B]

6. Just look upthread.

[JackRiddler]

11. This young woman's "irresponsibility" would have had no consequences...

without Bank of America's irresponsibility. Why can't some people see this simple fact? People being irresponsible cannot justify the use of deceptive schemes to exploit them by banks who know better. The bankers knew their systematic exploitation of the irresponsibility and stupidity of so many people was unsustainable. It was on them not to issue loans practically guaranteed to default. They didn't care, they cared only for the immediate profits and, guess what, could have guessed that their own later bankruptcy would be fixed at the expense of the taxpayers and savers.

[HughBeaumont]

51. Because it's just far easier to blame the victim.

Oh, and don't forget the ever-popular assertion that the middle/working/poor classes will "game the system any chance they get". But it's perfectly OK if those with wealth do it . . . for some weird reason . . .

[ecstatic]

9. I like that banks give people a chance

I was given a chance at 25 and I didn't blow it. :shrug:

[Hello_Kitty]

12. Bully for you.

Just hope they don't outsource whatever it is you do and you don't find yourself unemployed or underemployed and struggling to pay your bills.

[ecstatic]

14. That could happen to anyone though...

:shrug:

[Hello_Kitty]

27. But you might not be able to pay your mortgage if it happens

And someone could say you were irresponsible for picking the wrong career path or not keeping abreast of changes in your industry and the economy and proactively retraining yourself to remain employable and employed.

[closeupready]

33. Oh, yeah - +1000 on that. In fact, I know people who DO say that.

Who say that, no matter what happens to you, if you fall down, it will ALWAYS be your fault - that you shouldn't ever take any risks whatsoever that, if they go bad, will result in a bad outcome, and if a bad outcome does happen, the fault is entirely yours. :eyes:

[ecstatic]

34. Not sure where you're coming from. My point is that any loan can turn bad

anyone can get foreclosed on if they run into misfortune. I like the fact that young people and poor people were given a chance but I don't like that it didn't work out for so many people. I know some around here would like to keep all mortgages and loans out of reach of regular people, but I'm not one of those people.

[Hello_Kitty]

35. You used the phrase "I didn't blow it".

I'm merely pointing out that there are numerous ways for you to "blow" your chance. And you can bet that someone will find a way to blame you for it.

[ecstatic]

40. OK I can see how that could be misinterpreted

I don't think other 23 year olds should be discriminated against because of what happened to that young woman.

[Hello_Kitty]

41. Nor do I

I bought my first home at age 28. I had my finances checked with a fine tooth comb, though.

[Wapsie B]

10. BOA needs to eat this loan and any others just like it.

There's got to be a price to pay for what amounts to white-collar crime.

[taught_me_patience]

19. She ought to sue herself

for stupidity and greed. She knows her real income, her home payment, and her affordability levels. She wanted the home so that she could ride the housing gravy train to riches.

[Hello_Kitty]

31. Her lender wanted to do that too.

And lo the world economy was wrecked.

I blame the banks more than I blame people like the woman in the OP. YMMV.

[dugaresa]

29. Did she falsify her income or did the realtor or lender do it? That makes the difference

because in some cases that are being investigated, the realtor/loan procurement folks did the "fudging" and that means they are in hot water.

If she did it, then she should save her money and hopefully tuck this away as a lesson learned.

[gkhouston]

37. I'm betting the loan procurement people convinced her it was "the way things are done"

just like they kept telling us we really could afford a house that costs about twice as much as the one we live in.

[dugaresa]

39. we had that happen with our first house search many years ago

we fell in love with a home that cost $160K.

We could really only comfortably afford a $100K house.

The realtor came up with the most inventive ways of trying to get us to buy the $160K house but we were able to resist and found one for less than $100K.

[FarCenter]

43. Realtors are on commission and working for the seller

The realtor is not interested in the buyer getting a bargain. It makes their client, the seller, unhappy. It reduces their commission on the deal.

[leftyladyfrommo]

50. Exactly.

Probably 95% of borrowers don't understand this stuff at all. But, boy, the loan officers do.

[Statistical]

47. WTF? PERSONAL RESPONSIBILITY.

Now BofA isn't blameless and hopefully they lose a ton of $$$ in the foreclosure process.

However her suing BofA because she bought a house and didn't make the payments. WTF?

[Statistical]

54. "without ruining the borrower's credit rating"

Credit rating isn't a gold star system where everyone gets the highest feel good grade. "You all are winners. Gold star class".

The purpose is to determine the likelihood that someone will default on a future loan.
You don't think her willingness to take on way more debt that she could handle and lie about income to secure the loan doesn't materially affect her likelihood to default in the future?

Really? Come on take the blinders off.

Personal responsibility is a major part of credit worthiness. People who can go deeply in debt and make a choice not to tend to be less likely to end up in a situation where they default.
Someone who "must have" this house/tv/car/vacation they can't afford are more likely to fail.

The idea that she should
1) take no financial loss
2) sue BofA = make profit on lying and failing to pay mortgage
3) have her credit history wiped clean so future lenders won't know her willingness to overextend herself

that is utter insanity.

[tjwash]

55. BOFA is notorious at denying refis.

And yes...she can try to sue, but mortgage papers are pretty bulletproof in civil court. Just because they are giving you something, doesn't mean that one should take it.

Let me guess, she didn't read any of that 6 inch stack of boilerplate that she was signing, or even get it checked by a lawyer or paralegal first. They do provide you with all the copies in advance when you are in escrow so that you can do just that, and that's what the judge in the civil case will tell her (long...drawn out personal story from a few decades ago), before he slams the gavel down and tells her that she is 100 percent liable.

Hope she has good luck...23 is plenty young to bounce back though. She is going through a lesson that many young folks have gone through at that age with credit.

[Shagbark Hickory]

56. It's amazing how they can still be in business the way they treat their customers but I guess that's

what being too big to fail is all about.

I think the govt should shut them down but that's just me.

[crazyjoe]

58. she is responsible for her own stupidity. How stupid do you have to be

that you rely on someone else to tell you what you can afford?

[geek tragedy]

59. Stated income=she committed mortgage fraud.

She's not a victim. And she probably would not appreciate you telling people she committed fraud.