Predatory Mortgage Lending to Minority Homebuyers

Just saw this. Good road to go down, L.W.

DonnaLadd

Oct 14 2006

Great stuff, Latasha. Thanks so much! The predatory, minority-targeted practices described here remind me a little bit of the "linguistic profiling" study I covered in August, where conversations would go "Oh, yes, sure, $250 a month!" if you sounded white, but if you sounded black, heaven help you. LaRhonda Odom is a friend of mine--beautiful, wonderful, brilliant young woman. Definitely a name to watch. She will do great things... Cheers, TH

Tom Head

Oct 14 2006

Tom: that acorn report was bogus. they did not have access to credit scores. As such, there is no way to make a valid study. Period. All programs are based on credit scores. Unless you have access to the credit scores, which they don't there is no way at all to tell whether they should be subprime or prime. Sorry but if you are a 550 score you are going to be subprime. If 660, probably prime.

Kingfish

Oct 15 2006

Kingfish, without even seeing the study I feel comfortable saying that it's not bogus. I'm familiar with ACORN. They don't just make shit up. Now, you may not agree with the methodology, but until you've actually read the text of the study itself, you're really making some pretty serious unsubstantiated accusations. (And I now realize that I need to get more involved in ACORN. I knew LaRhonda worked there; I didn't know my old friend Diana Barnes did. The world gets smaller every day...) Cheers, TH

Tom Head

Oct 15 2006

Incidentally, I say this fully aware of the fact that I haven't read the text of the study, either. I haven't had time; I went to a VERY fun event at Hal & Mal's tonight (*smile*), have a church service to run in the morning and a sermon to preach in the afternoon, and am frankly too fried to dig into an Internet debate over study methodology. I am quite confident that the study does not include credit score data. I am also quite confident that it's not a bogus study. I have, here again, developed a certain amount of faith in what ACORN does. Cheers, TH

Tom Head

Oct 15 2006

Tom: makes two of us. I had just gotten in from Tiger Stadium and was still pretty inebriated. The carnage yesterday was unbelievable. Amazing what Milagro Silver Tequila will do to people (chilled of course) when you give it to them to shoot all day. We had an 8 man power funnel going called the Weapon of Mass Consumption. It got ugly. Back to the study. First of all I'm in the mortgage business. I wholesale to mortgage companies and banks. I have continueing ed in Truth in Lending, RESPA, and other applicable laws every year. I am pretty well qualified to criticize this study. The FIRST thing a lender looks at is credit score. It might look horrible if one ethnic group is getting higher rates then another. However, you have to look at the credit scores first and under federal privacy laws, that is almost impossible for any group to do. If you have a 560 or 540 score, there is almost no way you can qualify for FHA or Conforming Mortgages. If you have a 600 (give or take a few points) or higher, you will genearlly qualify. Generally speaking, above 600 when I see credit reports, the bills are paid, if there are collections, chargeoffs or bankruptcies, etc, they tend to be old ones and aren't considered anymore in the score. When I see 560's or lower, there are almost always 60 and 90 day lates recently on their accounts, recent collections, charge-offs, and bankruptcies. Its a much riskier loan if they are in the midi 500's. The delinquency rates are much higher and believe it or not, foreclosures are expensive for lenders. The rate is going to reflect that risk. The rate is also higher the higher the LTV is due to the risk. If you are putting down 15 or 20% when you buy a house. You will usually get a lower rate. The delinquency rates for people who put down 5% or less are MUCH higher then they are for people who are putting down 10% or more. Under conforming/FHA, the rates are generally a quarter point or so higher. Under subprime, the difference can be much greater in the rate. So first you get put in subprime due to credit score, then as too many people who have bad credit also don't have much money to put down on a house, the LTV (loan to value) puts them at a somewhat higher rate as it is a much riskier loan. Think about it. Would you lend 150,000 on a large scale to someone who had a 4 collections last year totalingi $50,000, a string of 30 and 60 day lates on their current mortgage or a bunch of 30 day lates on his rent and a few 60 day lates in the last year on his credit cards? continued.

Kingfish

Oct 15 2006

Having said all that, if you don't have access to credit scores, in my informed opinion, the study is not valid as the programs being criticized may have been what the borrowers who were victimized may have been all that they could qualify for. It may be discrimination involved. My point is, without access to credit scores you simply do not know and neither does Acorn. When the loan application comes in to a lender from a mortgage company, to a lender that is a file. Its not a person, its a file. Some lenders deal exclusively in subprime lending. Option 1 (owned by H&R Block), Homecomings (GMAC), Wells Fargo Subprime Division, Countrywide BC (subprime division), Decision I, Argent, and others. They dont' deal in conforming/FHA. Lenders that do are like Citimortgage, Interfirst (ABN AMRO), Wells Fargo Conforming division, Countrywide COnforming Division, Trustmark (yes, they wholesale to mortgage companies), Chase, and others. Now HERE is where, if there is any discrimination going on or Minority borrowers being placed into high cost loans or higher rate loans is probably taking place. To the lender that borrower is just a file. They are going to underwrite that file, fund it at closing, and service it. They dont' switch borrowers back and forth among programs just to get a higher rate. The marketplace is simply too competitive for that to happen on the scale implied in the study. If you try that then mortgage companies will send their loans elsewhere. The problem is at the mortgage company level. continued.

Kingfish

Oct 15 2006

It is the Loan officer at the Mortgage Company that takes the loan application. The Mortgage Company is typically hooked up with different lenders. Every MC makes its own choice as to who their lenders are. A MC may choose a lender based on rate, programs, service, and other factors. A Mortgage Company may choose to do nothing but conforming. I can usually tell that by who their lenders are. If all they have are the lenders on that second list I mentioned above, they just do conforming mortgages for the most part. That means they don't charge that much in fees, they usually put their borrowers, black or white, into the best program possible and get them a good rate. They usually don't fool with ARMS and other programs that are not good for the borrower (You should never get an ARM unless you know you are moving in a certain amount of time, ex, a resident out of med school or ARMS are good if the rates are very high and you want a lower rate til they come down). Others are hooked up primarily with subprime lenders. The brokers that do mainly prime loans are going to make their money on volume. They generally deal in purchases, they get their business from advertising and realtors, and have lower profit margins. From a personal viewpoint, they also tend to be more ethical and look down on subprime Mortgage Companies as being those that try to rip off borrowers. The mortgage companies that handle primarily subprime business are a different breed. Subprime loans are harder and require a lot more work believe it or not. These mortgage companies alot of times aren't even signed up with conforming lenders so if you apply for a loan, have a 700 score and 20% to put down, they have no way of putting you into a better program with a lower rate. They are not going to let that business walk out the door either. So they put the borrower into a subprime program with a 2/28 or similar ARM because that has a lower rate than a fixed rates and it looks attractive to the borrower.

Kingfish

Oct 15 2006

Because they are harder loans due to the credit problems, the brokers also charge more points and fees and build them into the loan. Yes, there is a bit of that that goes on out there. Its the loan officer, who is paid on commission by the way, who decides which lender to use. Its the loan officer who decides which program to use and who sells it to the borrower. The lenders have no way of knowing why a file is sent in, to them it is just a file. If an unscrupulous (and as the link below shows there are more than a few) loan officer wants to take advantage of someone, he can do it if her is really good and persuasive and the borrower DOES NOT SHOP AROUND!!!!!!!!! NOW more of them are doing what is called a clear benefit test. There must be a benefit to the borrower or else they will not approve the loan. Lenders are cracking down on the predatory lending to some degree. Having said that, there ARE Mortgage Companies in Jackson who do things they shouldn't and there are alot more of them then there should be normally. Here is a link: http://www.mortgagefraudblog.com/index.php/weblog/C41/ Pretty much every broker involved in those stories involving Jackson area mortgage companies are the same ones who engage in predatory lending. They don't only ripoff borrowers, they ripoff lenders as well as those stories and convictions show. I have dealt with some of them and they think nothing of sticking 6 points in a loan, putting the borrower in a 2/28 ARM to make the rate look good, making a bunch of money off of a deal, and then leaving the borrower holding the bag in a few years. Mississippi did not license brokers until 1999 or so and it was a few years before they got the division that audits Mortgage Companies and polices them really up and running so it is just in the last few years it is starting to get cleaned up. Now BACK to the original point.

Kingfish

Oct 15 2006

The study didn't look at credit scores so it is not valid but is speculative. The relevenat data needed to make it valid was impossible to review under federal law. Now how would I improve this situation for Minorities in Jackson? 1. Encourage minorities to shop around. You will shop around for a car, shop around for clothes, call different banks to get the best deal on a checking account, but when it comes to buying a home, you will call one mortgage company or bank and that is it. Always call three mortgage companies at least. I highly recommend calling FHA approved Mortgage Companies. They are more tightly regulated by HUD. They have to get audited financials every year. They have to have experienced people in the office. They have to put up an application fee for an FHA License that is over 1000 dollars. Their knowledge and expertise tends to be better than non-FHA ones as a rule of thumb and they usually have the best programs and rates. 2. Ask who a Mortgage Company does conforming mortgages (Conforming is Fannie Mae/Freddie Mac). If they say no, walk out the door. If Mortgage Company IS doing primarily subprime mortgages but is ethical and profession, it will still be signed up with conforming lenders so that a strong borrower IS put in the best program and rate. If a mortgage company has no conforming lenders, just leave. 3. Do NOT use a mortgage company based on race. Some of the worst predatory lending I've seen came from brokers who used the "use me because I am Black, you are Black line". That sounds dumb but it does happen out there and I've seen it more than once and its always by brokers that engage in predatory lending. If they use that line to get your business, leave. They should be saying I have this program, this rate, here is how it benefits you, etc. 4. READ READ READ all of your damn documents and dislosures. BY FEDERAL LAW within 3 days of loan application you should be given a set of disclosures. IF IT IS AN ARM, you should be given one and a pamphlet explaining ARMS at that time. Too often the borrowers sign and dont' read what they are signing. Read every document in your closing package. That attorney is bound by ethics and has a duty to explain. 5. Educate minorities on the importance of credit scores. Its gotten to where you can't rent, get insurance, or get hired without a good credit score. Explain the importance of not paying rent or mortgages in cash. If you are renting from a person, a lender will want to see cancelled checks not receipts. The reason why is fraud. I can cite you a bunch of examples where fraud takes place (and some by those brokers in that link) where rent verifications were forged (lenders will take verifications of rent from management companies though, just not individuals) and the lender was ripped off for millions of dollars. Lenders will always take cancelled checks as evidence of making rent/mortgage payments. If you truly do have bad credit, most subprime lenders will improve your rate, usually a half a point or so, if you can prove good mortgage/rent history payments. Well, I am sorry I went on so long but I wanted to educate and not do my typical rant. I have alot of problems with the study and I hope this epistle explained why. I have covered three states over the years in this business and been a loan officer as well years ago. I sit from the wholesale side and see the lenders and mortgage companies and how they operate. I think the focus should be more on the mortgage company and where they place the borrower and educating minorites on financial matters and credit scores. In fact, most people could use education in that area. Beat Fresno State!!!

Kingfish

Oct 15 2006

Kingfish, the following sentence alone, not to mention so many others, shows why your credibility on whatever topic you rave about is so lacking: Some of the worst predatory lending I've seen came from brokers who used the "use me because I am Black, you are Black line". That sounds dumb but it does happen out there and I've seen it more than once and its always by brokers that engage in predatory lending. 1. "Some" of the "worst" – OK, you've seen some instances of your dreaded reverse discrimination, which is the first thing you reach for when anyone tries to talk about racial discrimination. Sigh. Then you say "worst" -- compared to what? according to whom? You? It sounds suspiciously like you're trying to turn the tables yet again on a table that makes you uncomfortable. And let's parse your logic here: Because it's someone black doing it, that makes it "worse" than the types of predatory lending against minorities that this was about before you try to bait-and-switch the subject to yet more they-do-it-too whining? That's predictable considering your history of comments here on anything to do with race and racial discrimination. 2. "That sounds dumb" -- what, your statement? We're used to it. (smile) 3. "brokers" -- you're implying that this is widespread, except ... 4. "I've seen it more than once" -- so, at least twice? Oh, yeah, you're really proving your "worst" point. As for your advice from on high to minorities -- presumably because if people were as smart as you, these things wouldn't happen to them -- just seems condescending to me as presented. I'm curious what others think.

DonnaLadd

Oct 15 2006

where did I mention reverse disrimination?

Kingfish

Oct 15 2006

my credibility is lacking? Ms Ladd, I gave a pretty good explanation of how the whole process works. I resent you stating that i have no credibility on this issue. I don't call you a liar whenever I disagree with you. It is not ok for you to say I have no credibility about an area I work in and am pretty experienced. If you have an ax to grind with me, I'm sorry because I have none to grind with you. I have seen several brokers do just what I stated. One, who went to prison and was a councilman's son, would do just that. He did a mortgage for well respected minority member of the community. On a mortgage less than 90,000 dollars, he ripped him off for over $6000 in fees. Yes that is predatory lending. I saw him try to do it to another well respected (sorry, I won't name names in this forum although I will in a more private forum) Minority member of the community try to do the same thing when he had good credit. He would constantly tell borrowers to use him because he was a minority and was trying to help them, etc. Another one here in town engaged in real bad predatory lending practices for years before the owner died. They constantly made that claim when they would talk to borrowers. I did not say everyone of them does it. The main point on that small part of my whole post I was making was that race should not enter into who you choose for a lender and if someone in business brings that up as a marketing ploy instead of focusing on what they are providing you as a customer, walk away because in my industry, my experience has been that the ones that do are usually looking to rip you off. My experience has also been in my industry that businesses that stress how Christian they are or how honest they are (remember Integrity Mortgage here in Jackson? Busted for ripping off borrowers and also defrauding lenders) usually are not honest more often than not. I focused on the racial aspect because the thread was about minority lending. There was alot of good advice and educational stuff in those posts. Since you are a mortgage expert, I would love for you to tell me with hard facts what parts were wrong. ;-)

Kingfish

Oct 15 2006

First of all, I did not say that you have *no* credibility on this or any other topic. I'm trying to explain to you how, in your posts, that you hurt your own credibility (thus "lacking") with some of your sloppier and poorly considered statements. If you'd listen to what I'm saying, you might see that I'm trying to help you (you know, offer advice such as you're showering others with). The problem is not that smart folks might not believe that people of color participate in predatory lending. Doh. The problem is that you, inevitably, immediately twist every topic into looking at the fewer examples of the same thing being done to the majority who has perpetuated the practice, and then you try to equalize those in some way that doesn't completely wash (what is that logical fallacy called?). You are shooting your argument in the foot every. single. time. that you do that. But you cannot, or refuse to try, to see what I and others have tried to tell you, then I give up. I'm wasting my energy responding to your posts. And at what point did I say that I'm a mortgage expert? Kingfish, the most frustrating part of reading your posts–and there are many–is that you continually try to put words in other people's mouths. You are the King of Missing the Point. I'm sure you have good advice in there somewhere. But, personally, I'm having a hard time seeing it, or desiring to read it, among all your haughtiness on the topic. And because you haven't established a track record of credibility on topics that in any way involve race and minority issues, I'm not exactly in a position to suddenly think you have all the answers. With due respect.

DonnaLadd

Oct 15 2006

the last post I made on the subject was to help people avoid predatory lenders and programs. There are some things they can do to avoid them. One frustrating thing about some of this stuff involving ARMS is that there is usually a disclosure form, signed by the borrower, that explains it is an ARM and what its terms are. It is required by federal law. I am sure that most of these people will have these forms in their files. Unfortunately, people don't always read what they sign. Now here is what probably happens alot of times. Federal law requires that the disclosure is signed within 3 days of loan application. An unscrupulous loan officer can and will just include that disclosure within ALOT of other paperwork. One friend of mine never got one until it was buried in her closing package. She had no idea it was an ARM until I examined her closing package. The closer was a notary, not a lawyer, which too often is the case in closings. She got rheamed like some of the people in the story did. I wish I had not made that part of my post now earlier. That whole epistle was meant as an explanation as to how the system works and why I had problems with the Acorn study. Other than that, your points are well taken.

Kingfish

Oct 15 2006

The advice part is great. Just work on your delivery, and context. ;-) Sometimes simply dividing your thoughts into two different posts can help, if you see what I mean.

DonnaLadd

Oct 15 2006

Kingfish, I think your message is fine but your delivery is weird. You have described the ACORN study as "bogus" and "not valid," which are pretty strong terms, when what you really seem to be saying is that it's limited by the fact that it does not and cannot incorporate credit score data (which is undeniably true), and here's why you think this data could provide a better explanation for the ACORN data than racism. I think you've clearly forgotten more about mortgage lending than I'll ever know, so I feel comfortable accepting at face value your explanation of how the process works, but that's really a separate consideration from whether or not ACORN's study is valid. There's also the larger issue of why minorities would be more likely to have lower credit scores, which goes all the way back to our country's centuries-old history of apartheid--I mean, the only real disagreement you seem to have had with my post and Latasha's is that we attributed the issues unearthed in the study mainly to short-term racism, and you're attributing it mainly to long-term racism. Cheers, TH

Tom Head

Oct 15 2006

I agree about the breadth of that post. In a nutshell, the study is not valid if it has no access to credit scores. That is the biggest factor in determining what kind of loan a borrower gets ASSUMING the lender/mortgage company is ethical as I explained. If the average credit scores are different then that explains a great deal why one group seems victimized but upon closer examination they may not be victimized as much as previously thought. Now why do they have lower credit scores IF such is the case? Good question. I'm not always going to blame poverty on this one as I've seen credit reports of people who made good incomes but HAD to have the 600 a month SUV, the expensive cellphone plans, furniture accounts, not pay months of child support which is reported, to a credit bureau, default on student loans, and make other inexplicable decisions. It happens more than you think. I don't know if that is long-term or short term racism but when you see credit reports, you see some borrowers who have true hard luck stories but then you see the others who like to live beyond their means. The main reason I went into such detail was to show how alot of times it is more likely a loan officer or mortgage broker who is placing the borrower into the program and selecting the rate. I also know many people don't know how the process works and I saw an educational opportunity. Some lenders like Ameriquest have been busted for predatory lending but usually its the mortgage company who is engaged in it. I tried to give tips on how to avoid such a company. One other thing. In that link, most if not all, of those brokers mentioned in those fraud stories are involved in fraud committed against lenders. They just don't pull fraud against lenders. They usually engage in predatory lending against borrowers too. I know of one in one of those stories who is white and specifically targeted the Delta so he could hit people with subprime loans and charge alot of fees. As I said, Mississippi didn't license Mortgage Companies til a few years ago and has only been able to seriously start to police the industry since then.

Kingfish

Oct 15 2006

In a nutshell, the study is not valid if it has no access to credit scores. That is the biggest factor in determining what kind of loan a borrower gets ASSUMING the lender/mortgage company is ethical as I explained. Wait, I'm no mortgage expert here, but your statement isn't quite logical to me. You are saying unequivocably that the study is "not valid" and "bogus" with no access to credit scores -- which you then say is the "biggest factor" in determining the loan. It strikes me that if there are more then one factor, and clearly there are, then your "bogus" statement has some holes in it. I'd like to hear a second opinion about the study from someone a bit less trigger-happy on this issue. I'll see what I can do to rustle up an expert on these issues to address this more fully and without preconceived opinions about what is "bogus" and what isn't.

DonnaLadd

Oct 15 2006

Wow. I disappear for a couple of days and the thread blows up. Kinda cool. :-) Anyway, I've read all of the comments so far and have learned something from all of you. I appreciate your responses, and I hope more will join in. Keep talking!

LatashaWillis

Oct 15 2006

The reason why I state it is bogus is that Credit scores usually are about 40-50% of the equation if not more in determining what program a borrower should use. If half of the criteria used by lenders is denied to the authors of the study, that means they are having to make assumptions that seriously skew the study. IF they are the mortgage experts they claim to be, they know this and should have said they didn't have access to credit scores and how important they are in approving a mortgage. In my opinion, that makes the study invalid as they do not have access to the one crucial and largest piece of data that would determine if racism is taking place. Notice I do not say there is not predatory lending based on racism. I am only saying that this study has major flaws and in my opinion enough to render it invalid. Now I will say one other thing that should bother anyone reading this thread. If you click on that link I posted and examine that website, you can look at fraud stories for all other states. You will notice that Mississippi has alot more ongoing mortgage fraud cases than do many other states. Compared to Alabama and Louisiana for example, Mississippi far outpaces them in terms of these cases. The cases also tend to be much bigger and more serious than in those two states. If there is mortgage fraud, then there is predatory lending to be sure. This is turning into an interesting thread.

Kingfish

Oct 15 2006

The predatory, minority-targeted practices described here remind me a little bit of the "linguistic profiling" study I covered in August, where conversations would go "Oh, yes, sure, $250 a month!" if you sounded white, but if you sounded black, heaven help you. There is also a 20/20 report about profiling based on your name.

LatashaWillis

Oct 17 2006

Link correction: 20/20 report

LatashaWillis

Oct 18 2006

Here is a more recent story WLBT did on mortgage fraud in the jackson area. Its pretty sad. While some may say that if something is too good to be true it usually is, its not hard for a shyster to trick unsuspecting buyers. Keep in mind these same people think nothing of defrauding lenders who DO have billions of dollars, batteries of lawyers and other resources. Defrauding someone who is a regular working stiff and not rich is just as tempting, if not more so, for them. Link

Kingfish

Oct 22 2006

Kingfish, I'm having some trouble getting the thing to play. Could you give me a quick summary? I'll keep trying to play it.

LatashaWillis

Oct 23 2006

go to www.wlbt.com and enter mortgage in search box. should be first story. Black couple in Jackson was tricked by a Black mortgage broker and seller. They had bad credit. told them they could get them into a nice 300K or so house but there were some shenanigans involved so the seller got an extra 100K over what the house was really worth. Now they have payments they can't afford and it don't look good. There is ALOT of info I'm leaving out. I had problems getting it to play on one computer and got it to play on another. sorry.

Kingfish

Oct 23 2006

That sort of thing hurts me the most. The whole crabs-in-a-barrel mentality is what keeps blacks and other groups of people from moving up. Stepping on the head of someone else in order to get to the top will always come back to get you one way or another. You reap what you sow.

LatashaWillis

Oct 23 2006

Oh yeah. Have you heard about those new hybrid LIBOR ARMs? I read about those on bankrate.com, and I don't trust those either.

LatashaWillis

Oct 23 2006

When I did the search, I found the written report. If you can overlook the grammatical errors, you'll get the gist of what happened. Here's an unforgettable chunk of it: The family says they were lead to believe their mortgage would be far less. Patrick MaGee and 6 co-conspirators who allegedly orchestrated a number of mortgage fraud scams in Madison county, pled guilty to Federal charges. As for Premier Mortgage, our investigation finds the sign still out in Ridgeland. So we ventured in. Here's how the encounter went: " Is this Premier Mortgage?" "No it's not. "What is it? "New Place Lending." " They (Premier Mortgage) had a lot of questionable lending practices going on, mortgage fraud." "I don't know anything about that." "Can I get your name?" "No you can't, can I get you to leave?" "Certainly." The unidentified man denies any association with Premier Mortgage.

LatashaWillis

Oct 23 2006

bankrate is not a credible site. They just reached a settlement for some unsavory practices of their own. They are notorious for bait and switch. Having said that, LIBOR arms have been around for years. In fact, most ARMs are LIBOR. You find the LIBOR in the WSJ every day. Rates are market driven which can change daily or hourly. There is nothing inherently evil in that fact. If you get a 5 year ARM, its probably a LIBOR ARM. Same for a 1 year Arm, a 2 year ARM, etc. There are also ARMS based on the T Bill rates but the LIBOR tends to have better rates. The ARM is useful and DOES have its place. If rates are at 10 %, an ARM that is fixed for 3 years and alot lower in rate is adviseable as when rates get to 7 or lower, you will then refinance the ARM. If you know you are moving in a certain amount of time, an ARM is a good idea. However, if as is the case now, you are in a market where you can get a rate, assuming good credit, job history, etc, that is between 6-7%, it is senseless to get an ARM when it will be only a little bit lower than the fixed rate. I think what you mean are OPTION ARMS, where you have 3 different ways to pay. THAT is a bad idea and only for a few borrowers. If you are rich, and buying extra properties in an area that is increasing in value quickly, like Orange Beach/Gulf Shores a few years ago, then an Option ARM is a good thing as you can get a rate that is around 1% and in a year or so, sell the property for a huge markeup. Or if you are in military or a resident knowing you will move in a year or so, then its a good thing. That is it. No one else has ANY business getting in an Option ARM. Oops, an Option Arm is where you ahve the option of paying the regular monthly payment of principal and interest, interest only, and a minimum payment until you are negatively amortized at %110 of the original loan amount. Avoid them like the plague.

Kingfish

Oct 23 2006

LW, they way they pulled this off was they got an appraiser to help them. Lesson for the day: You have the right under federal law to choose your own appraiser.

Kingfish

Oct 23 2006

Kingfish, I know some who is doing a refi to consolidate debts and do home repairs. The lender she is working with recommended a LIBOR ARM where the rate was fixed for the first two years and becomes variable after that. From what I read, those loans are only good if you plan on moving in a few years. However, this person has had the home for over 30 years and wants to spend the rest of her life there and keep the home in the family. I think a fixed rate would be enough for a situation like that because she does not like surprises.

LatashaWillis

Oct 23 2006

call me or shoot me an email and I'll give you my number. Ms Ladd has my permission to give you my email address if you don't have it. ask her what her credit score is.

Kingfish

Oct 24 2006

It's late, so I'll (regretfully) have to be lazy and not go through the study throughly. Kingfish said that credit scores are 40-50% of the factors. What are some other factors they measured? More to the point - of the factors mentioned in the study, is there some non-credit score factor (or some combination of such factors) that correlates strongly with the credit scores themselves (say, Pearson r>0.70)? If such factors/combination of factors do correlate at r>0.70 with credit scores, then I think it should be possible to infer the expected credit score using the other factors/combination thereof. That might go a long way toward answering Kingfish's concerns. What do you think, King; do you think there's a reasonably strong corrleation between the credit scores themselves AND a non-credit score factors/combo thereof?

Philip

Oct 24 2006

Re:My Above Comment For the statistically minded, you'd likely be best off using something called a "Multivariate Regression" to measure the correlations. The Credit Score being the "Dependent Variable", with each non-credit score factor as an "Independent Variable". Sadly, I found no way to accomplish this using MS Excel, though I hear an open source software called "R" can do multivariate regressions. But at this point, I am WAY WAY above my amateur knowledge of such things. If you're interested, talk to a professional statisticial or a professor of statistics.

Philip

Oct 24 2006

PHilip, the credit scores determine pretty much everything else. Its the credit score that determines how much you can put down at a minimum (Loan to value, LTV). The LTV determines you're rate. You have to get a mortgage with an 80% LTV, you pay a lower rate than someone with a 100%LTV. The credit score determines what program you can use. Most programs have minimum credit scores. If you want to go conforming, then in general you will need a 600 or above score. You can go conforming with a lower score but that is usually if you have a higher amount of assets. The credit score also determines what your debt to income ratio is. Your gross monthly income is divided into your monthly bills on your credit report plus your new mortgage payment Generally 36-40% is the limit. However, if you have a higher credit score you can go higher. OR if you go subprime, you can go higher as well (and that is where some borrowers with bad credit get nailed because 50% of their gross income goes to house note, credit cards, car notes, etc). When determining mortgage insurance, the rate is determined by LTV (which is determined first by credit score) and credit score. Thus, a bad score can really jump up your MI payment and thus, your APR. The credit score pretty much controls the whole process. Yes, you need money to put down on a house, good income, etc but how much of each is determined by the credit score. So for me to say it controls over half of the transaction is not an exaggeration. Where I have the problem is when the study is used to say that minority borrowers are being discriminated against with high cost loans and higher APR's. If there is no access to credit scores, and there isn't, then there is no way to determine why the loans are higher cost. If the average score for the minority borrowers in the study is 560 for example, then that would explain probably 90% of the reason for the higher cost loans. If it was 620, then that would be a reason to wonder why so many people have high cost loans.

Kingfish

Oct 24 2006

PHilip, the credit scores determine pretty much everything else. Kingfish, your comments are showing that this is not as cut and dried as you presented it. You've demonstrated that there is plenty of room for bias problems to enter at many stages, and that it seems to me is the whole point.

DonnaLadd

Oct 24 2006

call me or shoot me an email and I'll give you my number. Ms Ladd has my permission to give you my email address if you don't have it. ask her what her credit score is. Donna has my email address, so she can send it to me. In the meantime, the scores are between 550-590. I'll give you specifics later. BTW, the loan specialist was already asked to redo the application so she can get a fixed rate.

LatashaWillis

Oct 25 2006

Oh yeah, it is a nationwide mortgage company, not local.

LatashaWillis

Oct 25 2006

I wouldnt' deal with a nationwide one if it does not have an office here in the area. Here is what law requires: within 3 days of loan application, lender/broker has to give you a good faith estimate, truth in lending statement, and other disclosures. IF it is an ARM, there is supposed to be a disclosure for that and a pamphlet explaining arms included. Scores like that are more difficult. She won't be able to get a great rate with those scores. She will probably have to go subprime because the mortgage insurance, which is credit score driven, will be very high. Alot of times the subprime payment, which usually does NOT have mortgage insurance, is lower than a conforming loan with a lower rate but high MI payment. Keep in mind, I don't know what is on her credit report either. Bankruptcies, charge-offs, collections make it even worse. You can go conforming with that rate BUT that is if you have alot to put down on the house which with scores like that, is not common. She also has the right to pick an appraiser. Sheree Allen is pretty good. Most of my clients use her and are very happy with her work. So are any of you learning from all this? ;-)

Kingfish

Oct 25 2006

Donna: It is pretty cut and dried. The credit score is THE major determining factor as I have explained. I could show you exactly how it works but it is the major factor. Its pretty cut and dried. Its like looking at a study without a control group. Its just not accurate. You can say all day that what I am stating is not true or wrong, but I can show you in black and white that it is beyond a shadow of a doubt. Do I deny there are higher cost loans in Jackson? Nope. My own personal theory is that until around 2000 you didn't have licensure. Mississippi had a reputation among the lenders as being the wild wild west. Anyone could be a mortgage broker. One guy doing it was also a cab driver. One did it out of the back of his butcher shop. Another one out of his dry cleaners. No education, no training required. Alot of quick buck artists entered the field. It took some time for licensure to take place. then a couple of more years until the state started auditing mortgage companies, disciplining them, and cleaning up the industry. I think the reason for the Acorn findings is that ALOT of bad apples got entrenched at the mortgage broker level and they are still being rooted out and they are ripping off borrowers by putting them in higher cost programs. Keep in mind that if the average credit score of the minority borrowers in the study is 560 or 580, that will explain alot of why the higher cost loans.

Kingfish

Oct 25 2006

She also has the right to pick an appraiser. Sheree Allen is pretty good. Most of my clients use her and are very happy with her work. The house was appraised yesterday, but the appraiser was assigned by the mortgage company. The loan interviewer said that he was not allowed to change the option. The appraisal company is an affiliate of the mortgage company, and they incorporated the fee into the loan instead of charging her up front. The loan interviewer said that he was not allowed to change the option. If she got another appraisal by someone else, how much would that run her? As for the loan, she already knew it would be subprime because of her credit, so she knows she'll have to pay extra.

LatashaWillis

Oct 25 2006

I wouldnt' deal with a nationwide one if it does not have an office here in the area. They have offices here, but a person in reat estate advised that she should not deal with a local rep because they may scam her.

LatashaWillis

Oct 25 2006

They both can equally as bad LW. That is why I said go to one that does FHA. They tend to be more tightly regulated and meet higher standards. The three I recommend, based on experienced, are Mortgage 1st, Advanced Mortgage. Community Bank, The Mortgage Connection. Local Countrywide Branch has a good reputation also. There are other good ones in Jackson but these are all FHA approved and can do subprime as well. Interesting how the realtor didn't recommend one. Most decent realtors will have 2 or 3 that they refer their clients to.

Kingfish

Oct 25 2006

I would REALLY love to know who the lender is. Wouldn't be Ameriquest by any chance would it? Sounds alot like their tactics. Email me. This is getting a little personal. I know its late in the game but I'm curious.

Kingfish

Oct 25 2006

one last thing: has she seen any disclosures? She should've seen those after the loan application within 3 days.

Kingfish

Oct 25 2006

Kingfish, the realtor did recommend the company, and it is one of the FHA-approved companies you listed. She has the disclosures and everything. They practically sent her a book. I don't know how to email you. Do you have an address you're not afraid to give out? Spammers are nasty creatures.

LatashaWillis

Oct 25 2006

ok. sounds like they are on the up and up. That is what they should've done. Just tell her to read everything in those and also to have everything explained to her BY THE CLOSING ATTORNEY. Should be ok then.

Kingfish

Oct 25 2006

Okay, thanks.

LatashaWillis

Oct 25 2006

This will be of interest: Across all loan types, the states with the highest overall delinquency rates were Mississippi (11.05 percent), Louisiana (9.50 percent) and Michigan (7.44 percent). Based on foreclosure inventory rates across all loan types, the top three states were Ohio (3.32 percent), Indiana (2.90 percent) and Michigan (2.20 percent). All state level results are not adjusted for seasonal effects. The states with the largest increase in overall delinquency rate in the past year were Michigan (135 basis points), Rhode Island (128 basis points), and Ohio (96 basis points). The states with the largest increase in foreclosure inventory rate were Michigan (59 basis points), Rhode Island (46 basis points), and Maine (43 basis points). http://www.mbaa.org/NewsandMedia/PressCenter/47057.htm

Kingfish

Jan 22 2007

Good news. Those predatory lenders featured on WLBT got sentenced. Tuesday, February 06, 2007 Mississippi Appraiser Sentenced for Role in Flipping Scheme Edward Young, appraiser, was sentenced for his role in a multimillion-dollar mortgage fraud scheme. Young was sentenced to 42 months imprisonment and 3 years supervised release. The court reserved ruling on restitution until a later date. Young must report to prison on April 9, 2007. Young was among 11 people charged for their alleged roles in a flipping scheme located mostly in Madison County, Mississippi. The homes' purchase prices ranged from about $200,000 up to $600,000. Five were sentenced in December 2006. Marvin Dawson, Anthony Burroughs, Tellis McLin and Patrick McGee, all Jackson-area businessmen, and Thomas Griffin of Vidalia, La., received prison sentences ranging from 15 months to more than five years. All five must report to prison Feb. 12. The other defendants are: Fransene Berry Shane Rothery Kelvin Brooks Lydon Posey Leroy Garrett According to the complaints, the defendants were buying and selling the same property on the same day. McGee, Burroughs, Griffin, McLin, Posey and Garrett would purchase homes most of which cost from $200,000.00 to over $600,000.00. Young, Berry and Rothery provided inflated appraisals to the lenders allowing the homes to be flipped, either to unsuspecting buyers or to one of the co-conspirators participating in the scheme. Dawson, operating as Premier Mortgage, brokered all of these loans between the lenders and the borrowers. The defendants would then divide the profits from the flip, which ranged from a few thousand dollars to several hundred thousand dollars on each property. Brooks was involved in purchasing at least one of these properties. Based on court records, Patrick V McGee has used the following names when purchasing properties involved in the alleged scheme: Patrick V McGee, Patrick Vashan McGee, Vashon McGee and Vashan McGee. In addition to inflated appraisals, other fraudulent information was provided to lenders to obtain these loans, including false employment and income information, false financial information, cashier's checks falsely reflecting that the borrower brought down payment money to the closing, and other false documents used to facilitate the loans. Most of the 15 properties involved in the complaints are in Madison County, Mississippi neighborhoods. The total amount involved in the fraud on these particular properties is approximately $6.7 million. Properties involved: 252 Northbay Drive, Madison, MS 109 Fieldcrest Drive, Madison, MS 288 Belle Rose Circle, Madison, MS 112 Red Oak Trail, Brandon MS 904 Cardigan Cove, Madison, MS 217 Hoy Farms Drive, Madison, MS 101 Overlook Drive, Ridgeland, MS 630 Eastwyck Drive, Ridgeland, MS 136 Shelby Drive, Madison, MS 408 Autumn Oak Dr, Madison, MS 412 Eastpointe Cove, Madison, MS 108 Country Club Drive, Madison, MS

Kingfish

Feb 6 2007

Thanks for the update, Kingfish!

LatashaWillis

Feb 8 2007

Jackson Free Press

Predatory Mortgage Lending to Minority Homebuyers

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