Monday, May 07, 2007

NEW exposed by the Washinton Post

Nice expose on the loan approval process at NEW, before they went bust. From the Washington Post:

Maggie Hardiman cringed as she heard the salesmen knocking the sides of desks with a baseball bat as they walked through her office. Bang! Bang!

" 'You cut my [expletive] deal!' " she recalls one man yelling at her. " 'You can't do that.' " Bang! The bat whacked the top of her desk. As an appraiser for a company called New Century Financial, Hardiman was supposed to weed out bad mortgage applications. Most of the mortgage applications Hardiman reviewed had problems, she said.

Hardiman cringed as she heard the salesmen knocking the sides of desks with a baseball bat as they walked through her office. Bang! Bang!'

But "you didn't want to turn away a loan because all hell would break loose," she recounted in interviews. When she did, her bosses often overruled her and found another appraiser to sign off on it.

Hardiman's account is one of several from former employees of New Century that shed fresh light on an unfolding disaster in the mortgage industry, one that could cost as many as 2 million American families their homes and threatens to spill over into the broader economy.

"The stress in that place was ungodly. It was like selling your soul," said Hardiman, who worked for New Century in 2004 and 2005. "There was instant notification to everyone as soon as you rejected a loan. And you dreaded doing it because you paid for it. Two guys would come with a bat, and they were all [ticked] off because you cut their deals."

Salespeople were supposed to be the "first line of defense" against fraud and bad loans, said Steve Krystofiak, president of the Mortgage Broker Association for Responsible Lending, a group that is trying to retool practices in the industry.

But salespeople worked on commission -- meaning the more loans they sold, the more bonus money they received. "That's a bad business model. It's absolutely contradictory," Krystofiak said, adding that he has witnessed salespeople tweak numbers in mortgage applications to ensure that the loans would be approved.


Perfect Storm said...
This comment has been removed by the author.
Perfect Storm said...

I think there are a couple of subprime scum that need there heads bashed in.

xs10shell said...

The New York Times broke a story on May 1 that New Century, Fremont, and some others have been using an accounting method called "gain on sale" which makes them look good on paper. It's beyond me, but apparently legal.

Anna Nonymous said...

New blog resumes the First NLC saga:

Anonymous said...

The problem is no one had a negative feedback loop for attempting to qualify underfinanced applicants. Perhaps if salemen had to pay a fee for each loan rejected there wouldn't have been so many bad loans. Oh also the amount should have gone to that appraisers for every rejection.