Gulf Shores In the way back pages of the Wall Street Journal today an item was buried that jumped up like a searchlight on a dark night. To no one’s surprise (at least no one I know!) it seems that even after the total collapse of New Century Mortgage Company in early 2007, most lenders continued to party hard as if there were no clouds on the horizon.
Importantly, and I hope a lot of Attorneys General and the U.S. Justice Department (or what is left of justice up there) note this paragraph well about how bad 2007 loans have become as foreclosure fodder:
“Questionable business practices may have played a role, too. Some of the 2007 loans ‘were knowingly originated as really bad loans,’ says Chris Mayer, a professor of real estate at Columbia University’s business school. Mortgage originators who profited handsomely from the housing boom ‘realized the game was completely over’ and pushed mortgages out the door, says Mr. Mayer.”
The huge role in the current foreclosure crises played by mortgage brokers at the origination side of this mortgage mess continues to go pretty much unrecorded and unfortunately unpunished. Many of these shylocks simply took one license off the wall (my bad, that would only be in the states that required real licenses) and looked for some other place to make a living. The companies that swallowed this garbage without hesitation are being targeted for lack of oversight in some cases (four states have now filed against Countrywide for example — California, Florida, Illinois, and Connecticut), but the little guy down at the bottom pushing the big lies on unsuspecting borrowers are free to go for the most part.
2007 seems to have been a nightmare. Later in the piece UBS AG is quoted as saying that 65% of subprime loans originated in 2007 will default compared with 45% from 2006 — both are horrendous figures. Washington Mutual has reported that more than a quarter of its subprime loans from 2007 are over 30 days past due now. National City, still running away from accountability but recently agreeing to come to the table from what I hear after ACORN actions in Detroit and elsewhere, also admits that 2007 loans are driving its delinquencies.
Makes you wonder? Once fire raged in Orange County and consumed New Century, where were the rest of the folks positioned in the watchtowers throughout the country? Makes you think it was all about greed and quarterly returns and the devil take the hindmost.