subprime mortgages

Another Slap on the Wrist for Bad Bank Wells Fargo

wrist slap
Wow, Wells Fargo is guilty of pushing well qualified home owners into subprime loans and ripping them off.

Wells Fargo Financial, the lender’s consumer- finance unit, pushed customers who may have been eligible for prime interest rates into loans carrying higher rates intended for riskier borrowers, the Fed said today in a statement announcing the settlement. Separately, sales personnel used false documents to make it appear borrowers qualified for loans when their incomes made them ineligible.

The Financial unit was of course shut down when their evil doings started to be exposed. Who is taking the rap? Not Wells Fargo executives, nope, 16 of the fired employees will be banned from the banking business. The guy who oversaw this operation, Mark Oman? He gets to retire.

This measly $75 million dollar fine is being touted as a record. Worse, harmed homeowners might have to be compensated up to $10,000! Wow! $10k when you've lost your home, awesome! That might pay for the moving van.

Credit slips is warning victims to watch out for settlement papers, getting them to sign their right to sue away for the paltry sum of $7000.

As far as I could tell the agreement does not provide for consumers to release claims in exchange for these paltry sums, but advocates would be well advised to review settlement notices with affected consumers carefully.

Ally Bank, Formally Known as GMAC, to Pay Fannie Mae $462 Million Over Bad Mortgages, BoA Sued by Allstate

GMAC, who changed their name to Ally Financial, is paying Fannie Mae $462 million to dump off their bad mortgages.

Ally Financial Inc, the lender formerly known as GMAC, on Monday said it agreed to pay $462 million to Fannie Mae (FNMA.OB) to avoid having to repurchase poorly underwritten mortgages sold to the housing finance giant.

Ally, which is majority-owned by U.S. taxpayers, said the agreement releases its Residential Capital LLC mortgage unit from any liability related to bad underwriting on $292 billion worth of loans sold to Fannie Mae, itself about 80 percent owned by the government.

Residential Capital owns GMAC Mortgage and Ditech Funding.

Ally, which is expected to go public next year, announced a smaller settlement with Freddie Mac (FMCC.OB) in March. Resolving questions about its potential liability could help Ally attract investors.

The lender, which is 56 percent owned by the U.S. government, said the agreements reduce the risk in its mortgage operations going forward.

Nice huh? Fannie Mae absorbs $292 billion worth of bad loans for less than half a billion dollars? According to the Wall Street Journal, Fannie Mae and Freddie Mac were demanding banks pay back bad mortgage loans when banks violated their mortgage purchase agreements.

Fannie and Freddie collected more than $9 billion from banks during the first three quarters of the year. At the end of September, another $13 billion in requests hadn’t been paid, including more than $4 billion that have been outstanding for more than four months.

Mythical Subprime - Cleveland Fed. Comments

The Cleveland Federal Reserve has a new commentary, Ten Myths about Subprime Mortgages and debunks each one.

Fed's Top 10 Subprime Myths

  1. Subprime mortgages went only to borrowers with impaired credit
  2. Subprime mortgages promoted homeownership
  3. Declines in home values caused the subprime crisis in the United States
  4. Declines in mortgage underwriting standards triggered the subprime crisis
  5. Subprime mortgages failed because people used homes as ATMs
  6. Subprime mortgages failed because of mortgage rate resets
  7. Subprime borrowers with hybrid mortgages were offered (low) “teaser rates”
  8. The subprime mortgage crisis in the United States was totally unexpected
  9. The subprime mortgage crisis in the United States is unique in its origins
  10. The subprime mortgage market was too small to cause big problems