Stripped Bare - Beneath the Feel Good Veneer of Subprime Lending

Chapter 14 - Full Disclosure

As I mentioned when I first started posting this series on subprime lending, I first got into the mortgage business in 1987.  The corporation I began with was a small, four (4) man mortgage broker shop, writing strictly “A” paper, prime, mortgage loans.  In 1989, I became a partner in this closely held corporation, and we grew the company into a full FNMA/FHLMC seller/servicer.  Meaning, instead of selling our loans off to larger lenders, brokering, we now held our loans and our customers made their monthly house payments to our corporation.  Additionally, we created a wholesale lending division wherein we marketed our corporation to mortgage brokers who now sold their loans to our company, we also serviced these mortgage loans.

I sold my interest in this corporation in January 1995.  At that time we had over one-hundred and twenty (120) employees and sales of just under one billion.  It was a profitable venture.

After selling my interest in this company, I originated loans for a short period of time for a smaller mortgage lender which folded not long afterward.

Upon the closing of the previously mentioned shop, in 1997 I marketed my mortgage talents to an individual with no mortgage experience who desired to startup a new mortgage broker business, on a contract basis.  I remained with this small broker for two and one-half years.  The first full year with this company was dismal, but in the last year we had sales of forty-one (41) million.  It was when I was with this company that I first originated and closed a subprime loan.

After this venture, I spent the years of 2001 through 2003 in the banking software industry.

In 2004, I joined Countrywide’s Full Spectrum Lending Division, Countrywide’s subprime lending behemoth.  I initially filled the position of assistant branch manager for this organization, and six months later I was made branch manager.  It was while with this national company that I saw just how deep the rabbit hole went in subprime lending.  Though I was initially impressed with Countrywide’s ethical statements regarding lending to subprime borrowers, I soon formed the opinion that this was mere window dressing.  I did not mesh well with this organization.  I attempted to have my staff facilitate prudent subprime lending, i.e. making my people correct bad debt issues which the company’s underwriting guidelines stated did not need correction, not pushing borrowers’ debt income ratios, etcetera.  Because this conflicted with the company’s volume goals, I was asked to resign in mid 2006.  Which I did.

I still think subprime lending could be a viable and profitable business concern, if done ethically, and with sound underwriting.

Posted by on 04/15 at 08:20 AM

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