If we didn’t have so much knowledge about the fraud and corruption in industry, we would be shocked to read that Countrywide Financial Corp. had an $893 million loss for the first quarter of this year. Nobody in the know would be shocked to learn that there may be serious problems with Countrywide underwriting of many home loans. A federal probe of Countrywide, the nation’s largest mortgage lender, is turning up evidence that sales executives at the company deliberately overlooked inflated income figures for many borrowers. Some of the problems surfaced in a mortgage program called “Fast and Easy,” in which borrowers were asked to provide little or no documentation of their finances. Both Countrywide and Fannie Mae, the government-sponsored company that bought many of the loans, classify the loans as “prime,” meaning low-risk. It now appears many of these loans were far from being “prime.”
The Federal Bureau of Investigation is looking into a wide variety of Countrywide mortgages that didn’t require full documentation. So apparently this involves more than just the Fast and Easy loans. It was reported that the FBI has concluded that extensive fraud occurred on the loans, and it is looking into whether the company violated securities law by failing to disclose that to investors. The folks running Countrywide let a combination of arrogance and greed override good judgment and fair play. That has resulted in lots of folks being badly hurt.
Source: Wall Street Journal
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