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The Countrywide Mess, Holy Cow!

By
Real Estate Broker/Owner

 I know there have been numerous articles about Countrywide Mortgage here on Active Rain but in the New York Times this morning a really detailed piece appeared that is fascinating.  I am naive because I have always thought there was some oversight by State Banking Departments.  That if you are licensed by a State they have reviewed your practices and ethics and you have "passed".  Well, so much for that.  This articl is a bit shocking to me as the practices are truly unethical and how can this be!!!!

One of the most amazing parts of the article as you keep reading are the mortgage brokers who state they never got 1099's for the income they made.  If this is the case there is going to be more fallout from this and I can only hope that some of these agents reported the income anyway. 1099's were requested according to the article and agents were told that Countrywide doesn't do 1099's.

This is some story. I don't want to pass judgement on anyone and I suppose the agents got caught up in the culture of the company but you just have to wonder how all of this was acceptable.  Was it that it couldn't be foreseen and the crash was not on anyone's radar?  Amazing, anyway to read the article please click here

 

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New Orleans Property Lady, LLC

Broker/Owner and REALTOR (r) 

New Orleans, LA 70125

504-908-2268 (C)            

 Licensed in the State of Louisiana, USA

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Copyright 2012, Miriam Bernstein, All Rights Reserved

Comments (9)

Sean Allen
International Financing Solutions - Fort Myers, FL
International Financing Solutions

Interesting article.

Sean allen

Aug 26, 2007 12:57 AM
Melissa Grant
A Serendipity World - Greenbackville, VA
The Law of Attraction In Life & Business
Interesting.........
Aug 26, 2007 01:04 AM
» Bill Burress Nationwide Mortgage Originator
» Bill Burress Nationwide Mortgage Originator - Fort Myers, FL

Miriam:

I read the article.  I understand why you were shocked.  It was a very biased and sensationally written article.

Countrywide, like any company in America is first and foremost a sales company. Of course they are going to lead borrowers to products that are more profitable. Afterall, they are not a charitable or non-profit organization.

If they don't issue 1099s to mortgage brokers, that is no big deal.  I deal with over 100 lenders and most don't send out 1099s.  Guess what?  The checks are made out to my company and deposited in my company account.  They are recorded as income.  There is no way around it.  Every check the company receives from a lender is income. I can't believe that there are brokers whining about it.  They need to grow up.

Aug 26, 2007 02:31 AM
Miriam Bernstei
Rochester, NY
Bill, educate me.  If 1099's aren't issued because the company is reported it as income does that mean that the brokers are shareholders or how does it work.  Why is it no big deal that 1099's arent issued, explain please?  Also I understand that mortgage brokerages are a sales company but is the public properly informed about this?  We real estate agents need a disclosure signed explaining our relationships with the public what do mortgage brokers do to properly inform the public.  Leading borrowers to profitable products is one thing but dealing with an uninformed public is another.  Where do the ethics lie?
Aug 26, 2007 04:18 AM
» Bill Burress Nationwide Mortgage Originator
» Bill Burress Nationwide Mortgage Originator - Fort Myers, FL

Miriam:

The 1099 is strictly a function of the I.R.S.  The mortgage brokers are not shareholders.  The mortgage brokers are acting as independent mortgage brokers (subcontracted agents).  Countrywide funds the loan and the mortgage broker's fees are part of this funding.  The mortgage broker receives the fees from the loan disbursements so therefore it is income.  The checks are cut to the company account.  When a check is a company check, it must be deposited into a company account. It cannot be cashed.  The mortgage broker has the responsibility to count this as income.  Whether or not the broker receives a 1099 has no bearing on whether it is income or not.

Every company in America is a sales company.  Countrywide is a sales company that just happens to be in the mortgage business.  I don't know what you mean about informing the public about being a sales company.  Everyone knows the mortgage company does not make money unless the loan closes much the same way that realtors do not make commissions unless a loan closes.

The mortgage broker also has a mortgage broker contract and mortgage broker retention agreement which explains to the borrower the relationship with the borrower.

Mortgage brokers are regulated by individual states.  The different states require different disclosures.  Mortgage brokers have many more disclosures required than do real estate agents.  The mortgage broker has the federal laws and the state laws to follow.  These disclosures are written purposely in easy to understand language with no legalise.  I don't buy into the "uninformed public" argument.  There are over 80 pages at closing and probably over half of these pages reduntantly explain the loan.

I understand Illinois is considering requiring borrowers to attend a mortgage class before taking out a mortgage loan.  I think all 50 states should adopt this.  This would affectively put an end to the frivolous law suits against mortgage lenders and make the public responsible for their actions.

How can someone go into a closing and sign 80 plus papers agreeing to a loan, then later say they didn't understand what they were signing?  Did they read the papers before they signed?  If they didn't read the papers before they signed, then how is anyone else responsible?  By their own admission they lied at the closing when they signed the papers stating they agreed to and understood the conditions.  They are liars.  Now, when they say they didn't understand what they signed at the closing, Are they lying?

Borrower's amnesia occurs on adjustable rate mortgages when the rate adjusts upward.  The borrower doesn't recall the transaction particulars at closing and did not understand anything they signed at closing.  Borrowers amnesia never occurs on adjustable rate mortgages when the rate adjusts downward.

Aug 26, 2007 02:45 PM
Miriam Bernstei
Rochester, NY
Thanks Bill now I understand a bit more about this process.  Part of the problem is that when we go to the closing table can the buyer really take the time to read 80 pages of disclosures and isn't it too late by then?  The loans are explained but what I don't believe what is adequately explained is that the fees and all else not just the rates are negotiable.  The buyers I speak to don't really know where to start the discussion it is so cumbersome with so many fees it is a bit overwhelming and buyers especially first time buyers are insecure. 
Aug 26, 2007 10:10 PM
Margaret Woda
Long & Foster Real Estate, Inc. - Crofton, MD
Maryland Real Estate & Military Relocation
Miriam, Bill has done an excellent job of addressing your questions, and I'm sure he'll answer that one, too.  But I'm going to step in here and say that most, if not all, of the disclosures are provided to borrowers at application, not closing.  If you are a REALTOR, and you have not read the required mortgage disclosures just for your own information, it's time to do so now.  Maybe you can help remove any fear on the part of your buyers, if you're familiar with what they're reading.
Aug 26, 2007 10:20 PM
Anonymous
Anonymous
Margaret, thank you so much.  The problem is that even with these disclosures we have quite a mess don't we.  Bill said in his post that the disclosures are provided at closing.  So, Margaret, how did this all happen if all is well in the world and the public was properly informed.  I appreciate your opinion as to what I should do, I am aware of the disclosures, but thanks for your thoughts.
Aug 26, 2007 11:03 PM
#8
» Bill Burress Nationwide Mortgage Originator
» Bill Burress Nationwide Mortgage Originator - Fort Myers, FL

Miriam:

At the closing table everything to know about the loan is disclosed.  Margaret is correct.  Many disclosures are given before the closing.  At the closing table, much of the disclosures given are the same ones that were given previously.

No, it is not too late at the closing table to read 80 pages of loan papers. The borrower better read them.  The truth is, many of the papers are generic and are not unique to the individual transaction and may be government documents, ie: fair lending, ECOA, right to receive a copy of the appraisal, etc.  These documents can be quickly gone through at the closing to save time.

Then there are the more important documents.  A borrower should always read these thouroughly.  The HUD, the mortgage note, pre-payment penalty rider, adjustable rate rider, and the loan program disclosure. There are additional documents that will repeat the terms and conditions of the loan, the fact the rate is adjustable, how the loan dispurses etc.   These are placed in the package specifically to keep the frivolous law suits from happening.  Unfortunately, I don't think it is working.  The borrower should not sign anything he or she does not understand. 

In my loan transactions, the fees nor the rates are negotiable.  They are what they are.  The buyer may buy down the rate if they choose but I don't usually recommend that they do this.  There are many third party fees to a closing.  The third parties don't negotiate their fees with the buyer.  I never negotiate with my buyers with my fees.  They are what they are.  I guess they are negotiable to the extent that they don't have to take the deal and are free to walk.  Allowing fees to vary from transaction to transaction could subject the mortgage broker to discrimination law suits.  Not only that. The mortgage lending business is not purely capitalistic.  There are laws regarding fees on mortgage transactions.  These laws are there to protect the consumer from gouging. 

In answering your questions of how did we get into such a mess and what to do from here.  First of all, there were many external factors causing the demise of mortgage lending.  The market is the number one reason.  The market turned.  Its really that simple.  Wallstreet stopped buying sub-prime and alt-A loans.  I think the problem is, everyone wants to try to find a scapegoat.  The real estate bubble was largely created by greed.

Where to go from here?  Regarding your closings.  You can attend all of your closings.  Make sure your buyer understands the documents they are signing.  Not to sound flippant but seriously, if you have a buyer that cannot understand these documents, you really need to stop the closing.  These papers have been dumbed down to probably a third grade level.  At this point, you are trying to close a transaction with someone that is, shall I say is I.Q. challenged.  They really need a guardian present and a P.O.A. to sign for them.

Aug 27, 2007 01:36 AM