Subprime and the Banks: Guilty as Charged

Subprime and the Banks: Guilty as Charged
http://executivesuite.blogs.nytimes.com/2009/10/14/subprime-and-the-banks-guilty-as-charged/?hp



Here's the link to that evidence:
http://graphics8.nytimes.com/images/blogs/executivesuite/ChaseFlyer.pdf

I'm not a bit bitter, no.

... income amounts on stated income loans. "Go on salary dot com to get an idea for what sounds reasonable. Don't worry, we won't pull a 4506" ( a 4506 is an IRS document the customer signs authorizing the bank to pull tax return transcripts).

They knew then that the subprime mortgage was a bad investment. Scroll down to this 2005 article that talks about the new trading strategies. There's another article in the WSJ that lays it out even clearer, that I'll keep looking for. These people knew exactly what they were doing. ALL of them.

http://online.wsj.com/article/SB112485097747721533.html

And check this from a comment on MarketWatch:
http://www.marketwatch.com/story/jp-morgan-profit-jumps-past-estimates-2009-10-14

http://www.nytimes.com/2007/03/09/business/09insider.html?pagewanted=print

Some hedge funds actually hedged from the start. In July 2005, TPG-Axon, a $7.5 billion hedge fund founded by a former Goldman Sachs trader, Dinakar Singh, invested $100 million in ResMae Financial Corporation, a residential mortgage originator and servicer. In February, ResMae filed for bankruptcy protection. (An affiliate of Citadel Investment Group has since agreed to buy the remains.)

TPG-Axon, however, also bet against the subprime sector to offset its exposure from the Resmae position, said a person briefed on the fund. TPG-Axon funds are up about 6 percent through February.


But the more nuanced tale in the subprime meltdown is that of Scion Capital, a $700 million hedge fund in Cupertino, Calif., founded by a former neurologist, Michael J. Burry. The fund made a smart bet — but one that was early and nearly brought the fund to the brink.

Scion Capital is a long-short value hedge fund, meaning that it looks for undervalued and overvalued stocks and bets for them or shorts them, betting the price will fall.

In May 2005, Mr. Burry decided that the housing market was overheated. Credit had been overextended and the appreciation in home prices had the earmarks of a bubble. He placed a bet that the subprime market would collapse.

To do so, he used credit derivatives to short — bet against — subprime mortgage tranches that are part of mortgage-backed securities. The derivatives were essentially insurance against a default, so he would make money when subprime started to deteriorate.

Mr. Burry ultimately entered into eight credit derivative agreements that effectively shorted the riskiest parts of subprime mortgage pools issued in 2005. That investment, which looks smart today, hurt the performance of the overall fund as the subprime market continued to hum.

Here you have an eyewitness in a post above talking about a direct bank employee advocating falsifying incomes in order to sell mortgages to people who obviously would not be able to maintain them.

Money was made with fees with the loan was "originated" plus assorted other banking fees. Money was made when the mortgage was sold. Money was made when the mortgage failed (due to the credit default swaps).

And remember that even people with no actual investment could "bet" on the outcomes by buying credit default swaps.

BAD MORTGAGES were a commodity in and of themselves. This is FRAUD!!!!!!!!!!!!!!!!!!!!!!!

failure in subprime mortgages.

"...the bank doesn’t need income or job verification..."

....they figured out how profit from the crashing of the housing market, and then they crashed the housing market....easy, just like shooting fish in a barrel....

Seriously.

What he doesn't mention is the internal Chase memo that was circulated instructing their retail loan officers and brokers in the most effective ways to game the system (automated underwriting).

http://www.cnbc.com/id/23842458
The memo was entitled "Zippy Cheats & Tricks" and read, in part...
1. Make sure you input all income in base income. DO NOT break it down by overtime, commissions or bonus.

2. If your borrower is getting a gift, add it to a bank account along with the rest of the assets. Be sure to remove any mention of gift funds.

3. If you do not get (the desired results), try resubmitting with slightly higher income. Inch it up $500 to see if you can get the findings you want. Do the same for assets."

So they show everyone under the sun how to cheat and make more loans with Chase while blaming brokers?
Brokers do not create loan products (no doc, stated income, NINJA "no-income-no-job-(no)assets", etc).
Brokers do not underwrite loans or sell the loans on the secondary market for huge profits.

Meanwhile, brokers are a vanishing breed of small business.

http://www.democraticunderground.com/discuss/duboard.php?az=show_topic&forum=132&topic_id=2032131#2032145

yeah....greasing the economy's wheels alright.



dumbfucks.



A family friend worked for them (and his wife, too) and he told me some of the stuff they'd do to put people into a mortgage. People with iffy credit would get very high interest rates (11-12% when going for a 30-year fixed was 6-7%) and they'd charge them several thousand dollars in fees just for originating the loan. People would be upside down on their house from the get-go even if they were putting down a small down payment!