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I haven't blogged in awhile, not because I am uninspired but rather, I have been busy turning parts of this blog into a book. Well that and I took a vacation back to the land where all the debauchery described here occurred.
Returning to the place where I worked as a loan officer for three years and lived for twice that time brought mixed emotions. My hope was to avoid running into any of my previous costumers or real estate contacts, unless of course by choice. That mission was accomplished. I didn't want to see old customers because I was in fear of getting physically or verbally assaulted because of the loans I had done for them. and frankly, I feel sorry for a lot of people who are trapped in the sandbox where I made a ton of money for awhile and then fled.
I was struck immediately by the impacts of the housing crisis on the entire region and while it should have come as no surprise, I still was shocked to see predictions I had made long before coming to pass. My friend and co-blogger, A.Hole, and I met my friend and real estate agent, Judy Moody, for happy hour. Of course, we drank a lot and as to be expected, talked about real estate and gossiped about former colleagues we still didn't like. I heard stories of homes purchased for $800,000 in 2006 selling at short sale for $350,000. One of these homes was purchased by a gentleman that only earned $50,000 a year. Obviously, he was the beneficiary of a liar's loan but he was just one of thousands who purchased a home he couldn't afford in a highly speculative market.
Economics 101 as it applies to housing is that housing demand is driven by employment. In theory, people need income to buy a home. The housing boom took this fundamental tenet of economics and spit on it. In the area where I lent money, we had very little employment and most of it was tied to tourism. A great number of people in the sandbox are reliant upon unemployment in the winter as their jobs are seasonal but, the vast majority of people were self employed or directly employed by industries associated with housing. This includes a plethora of self employed individuals, real estate agents, and construction contractors. Our housing boom was driven by people on the other side of the bridge purchasing second homes and investment properties and our local speculators, who behaved like they were players in the gold rush. People who had no business owning one home found themselves temporarily exercising domain over small, crappy housing empires. It couldn't last.
A number of things conspired to cause the decimation of the housing market in the sandbox. Fannie Mae, the Federal Reserve, and government policies were the catalyst but, the local developers and real estate players pushed the market over the edge.
Much like the Tragedy of the Commons, where everyone acting in their self interest brings about a negative outcome for themselves and the greater good, real estate developers went nuts. With no consideration to the sustainable supply of certain types of housing in the region, condo developers saturated the market with units that demand could not possibly keep up with. Planned urban developments went up everywhere, even where they shouldn't. Development in a protected wetland was possible if you knew the right people; no one thought about whether they should do it, they just doled out favors and protected the fat cats of the region. The spoils of the boom went to the early developers and investors who amassed wealth at an unprecedented rate. Seeing the gains to these early entrepreneurs, every Tom, Dick, and Harry wanted in on the splendor. The last to get in are suffering the most as profits were driven out and then the market collapsed completely, much like the species crash of an unsustainable animal population. The housing market is very Darwinian, but the fittest in this case were those who got in first and then had the good sense to the get the hell out while the gettin was good and those who had political ties to avoid silly things like zoning laws and environmental regulations that the unconnected were subject to.
At a particularly drunken happy hour at a bar by the Bank of Hell ruled by the Mortgage Devil, I got in an argument with people who had invested in a condo development on what they call a river. Growing up on the Mississippi, I felt the need to point out that their so called river looked like a polluted ditch and bore no resemblance to a real river. They argued with me and then realizing I wouldn't change my stance that not all waterfront property is created equal, they changed their tactic to arguing that the new condo development would appeal to young professionals. I responded, "To attract young professionals you must have jobs and this town doesn't so I think there is a pretty major flaw in your understanding of the demand for these units." No amount of Ketel One keeps me from making sound economic sense but these people were having none of it. They told me I didn't understand real estate and they would prove me wrong. Yeah, right. I went by the project and one whole building is sitting sheathed without Tyvek, unfinished and blighted. The other condo building they actually finished has a vacancy rate that appears to be 90%. As I predicted, young professionals go where the jobs are and are not swayed to deviate from their economic self interest by a creek filled with litter and surrounded by crime.
The entire region looked sad to me despite the flood of tourists from Pennsyltucky, New Jersey, Washington D.C., Baltimore, and surrounding cities. The housing market in the sandbox looks to be at least a year away from even the seeds of recovery and with the economy still struggling, financial distress for people underwater in their homes or turning their second homes into rental properties is nowhere near over. A glance at the rental listings for the area show how the flood of housing units for rent has depressed rental prices. Great for renters? Perhaps, if they could find a job.
Buying at the beach became the American Dream with the help of incentives from the Federal Government yet, our government is accepting no responsibility for its contributions to the crisis. Even those people in the sandbox who have encountered economic ruin due to their belief that the housing market was a never ending path to wealth blame the "Greedy Bastards on Wall Street." Ummm, people want to make more money, duh. That is only a problem when the government provides incentives to do so at the expense of common sense, economic sustainability, and future economic growth.
If the government gives your kids free reign in a candy store for a decade, you will get a bunch of fat kids with cavities. What happens when you give adults these same incentives but trade the candy store for the housing market, oh yeah, an incredible bust and recession.
On a positive note, if you are independently wealthy and require no employment, I can guide you to some tremendous values in a resort community. If however you want to live at the beach but need income to support the habit, I got nothing.
Showing posts with label Liar's Loans. Show all posts
Showing posts with label Liar's Loans. Show all posts
Friday, July 2, 2010
Sunday, May 9, 2010
This one time...at Loan Officer Academy...
Ok, this isn't going to be an "American Pie...One time at Band Camp" story where a flute is inserted into some orifice....but who knows.... it could have been because I am not exactly sure what Curly Sue was doing with that Loan Officer from Florida. Now that I have your attention....I previously wrote about the overall experience of “Experienced Loan Officer Academy”. But, I wanted to save a chapter for what I actually learned in training.
Apparently, The Bank of Hell had unleashed a loan product they were very proud of and encouraged us to use whenever possible….and if you followed the steps I was taught, you could almost use it all of the time. More on that a little later.
The new “Super” loan product they taught was a Fannie Mae Stated Income/Stated Asset loan. Why is this so special? Let me explain. The acronym loans that Turdy wrote about previously carried a higher interest rate due to the inherent perceived risk of those products (i.e. NINA, NINANE). Fannie Mae backed loans had the lowest interest rate of all the loan products because they were supposed to be A+ “prime” loans. They carried the lowest risk and therefore had the lowest rate. But this whole system got bastardized by the Bank of Hell. But to be fair, it was with Fannie Mae’s blessing…and no, I am not trying to incite Barney Frank.
How did this work? Well, I was taught in training that if I had a client with a credit score of 680 (decent score) or higher on a purchase or 720 (good) or higher on a cash out refinance transaction it could be eligible for the “Super” loan. If you met these score requirements you didn’t have to verify the borrower’s income with pesky paystubs or W-2’s and you didn’t have to verify that the money they told you about for their down payment and closing costs actually existed….and the “beauty” of this was the rate and terms on the loan were the same as someone who fully documented their loan. Brilliant!! But wait ...there is more…if the value you have listed for the property they were purchasing or refinancing was acceptable to the automated underwriting program….you didn’t have to get an appraisal. You could get use an automated value from the “internets”!! Ok, so no income verified, no assets/down payment verified, and no physical appraisal needed to be completed…..and still the interest rate was no worse than the suckers that fully documented their loan with their “primo” credit.
Of course the Mortgage Devil used the powers of the “Super” loan for evil and not good. He took advantage of his self-employed borrowers by having them convinced he could do a stated income/stated asset loan for them a 1/2 % below the competition because he was “such a good guy”. But what he actually did was inflate the rate of the “Super” loan to make a bunch of overage (extra commission). For example…during the time period in question…a traditional stated income/stated asset loan would have a rate of 8.00% for a 30 year fixed while a Fannie Mae’s A+ loans had a rate of 6.00%. So, the Mortgage Devil would have his client call some mortgage broker who didn’t have the "Super" loan and get quoted 8.00%. He would then sell them a loan at 7.50%....he was a hero!! Wait, what is that you say? I thought the “super” loan was the same rate as Fannie Mae’s A+ rate? Well, you are correct. The Mortgage Devil would take that extra 1.50% as overage and make a ton of money of that one loan. As, I was told by my Munchkin Trainer this loan was supposed to give us a competitive advantage against the competition so we could close loans quicker and hassle our borrower’s less. But the Mortgage Devil found a sleazy way to take advantage of the system so that he could pay for all of his second homes.
When I returned from training to the Bank of Hell...I got the "real" training on how to use/manipulate/bastardize this "Super" loan. What was discovered by the Mortgage Devil or one his Minions is the exact sequence you had to follow to limit the paperwork and manipulate Fannie’s system. Here is the step by step way I was taught and why it needed to be done that way:
1) take loan application over the phone and enter into computer.
2) pull credit...if the score meets the requirement move to step 3.
3) go ahead and get an automated value for the property and enter it into the computer
3) make sure you have stated enough income to keep the debt ratio under 45%.
4) send the loan through Fannie Mae's underwriting system to get "Super" loan approval without having to verify the income, assets, and no physical appraisal..Brilliant!
Because if you just put a value based upon what the Borrower thinks their property is worth and you send it through Fannie Mae's automated underwriting it may get approved with that value. You excitedly call your customer and say..."Congratulations, you are already approved. Since your credit is so great...we don't need any documentation or even an appraisal". But what happens when the automated value is different than what the customer thinks the property is worth? If you enter the automated value and Fannie's automated underwriting doesn't like it...then it would red flag the whole loan for excessive value or cut your value where you may have a loan to value problem. No one wants red flag's on their loans or value issues. If you pull the automated value first as suggested in step 3 above, you can see if their is a potential problem ahead of time. Good deal, right? Actually, the system was set up for check and balances against over-inflated appraisals or potential for values exceeding loan amounts. By reversing the steps you circumvent that process. Brilliant!!..hmmm?
Why do you have to keep the debt ratio under 45%...well, because if it was higher it wasn't eligible for a "Super" loan. I know your next question will be..."well what if the income they told you that they made causes the debt ratio to exceed 45%?"....my answer comes from the Mortgage Devil...in his words...you "just bump up the income to make sure it is under 45%". Duh!! It's so simple...and so fraudulent at the same time. He honestly didn't see where this was a problem. You "just bump up the income!"....that was his war-cry that day. Ok....so, we learned today how to turn a Fannie Mae loan into a Liar's Loan....and still charge a higher interest rate to gain more commission...got it!!
Apparently, The Bank of Hell had unleashed a loan product they were very proud of and encouraged us to use whenever possible….and if you followed the steps I was taught, you could almost use it all of the time. More on that a little later.
The new “Super” loan product they taught was a Fannie Mae Stated Income/Stated Asset loan. Why is this so special? Let me explain. The acronym loans that Turdy wrote about previously carried a higher interest rate due to the inherent perceived risk of those products (i.e. NINA, NINANE). Fannie Mae backed loans had the lowest interest rate of all the loan products because they were supposed to be A+ “prime” loans. They carried the lowest risk and therefore had the lowest rate. But this whole system got bastardized by the Bank of Hell. But to be fair, it was with Fannie Mae’s blessing…and no, I am not trying to incite Barney Frank.
How did this work? Well, I was taught in training that if I had a client with a credit score of 680 (decent score) or higher on a purchase or 720 (good) or higher on a cash out refinance transaction it could be eligible for the “Super” loan. If you met these score requirements you didn’t have to verify the borrower’s income with pesky paystubs or W-2’s and you didn’t have to verify that the money they told you about for their down payment and closing costs actually existed….and the “beauty” of this was the rate and terms on the loan were the same as someone who fully documented their loan. Brilliant!! But wait ...there is more…if the value you have listed for the property they were purchasing or refinancing was acceptable to the automated underwriting program….you didn’t have to get an appraisal. You could get use an automated value from the “internets”!! Ok, so no income verified, no assets/down payment verified, and no physical appraisal needed to be completed…..and still the interest rate was no worse than the suckers that fully documented their loan with their “primo” credit.
Of course the Mortgage Devil used the powers of the “Super” loan for evil and not good. He took advantage of his self-employed borrowers by having them convinced he could do a stated income/stated asset loan for them a 1/2 % below the competition because he was “such a good guy”. But what he actually did was inflate the rate of the “Super” loan to make a bunch of overage (extra commission). For example…during the time period in question…a traditional stated income/stated asset loan would have a rate of 8.00% for a 30 year fixed while a Fannie Mae’s A+ loans had a rate of 6.00%. So, the Mortgage Devil would have his client call some mortgage broker who didn’t have the "Super" loan and get quoted 8.00%. He would then sell them a loan at 7.50%....he was a hero!! Wait, what is that you say? I thought the “super” loan was the same rate as Fannie Mae’s A+ rate? Well, you are correct. The Mortgage Devil would take that extra 1.50% as overage and make a ton of money of that one loan. As, I was told by my Munchkin Trainer this loan was supposed to give us a competitive advantage against the competition so we could close loans quicker and hassle our borrower’s less. But the Mortgage Devil found a sleazy way to take advantage of the system so that he could pay for all of his second homes.
When I returned from training to the Bank of Hell...I got the "real" training on how to use/manipulate/bastardize this "Super" loan. What was discovered by the Mortgage Devil or one his Minions is the exact sequence you had to follow to limit the paperwork and manipulate Fannie’s system. Here is the step by step way I was taught and why it needed to be done that way:
1) take loan application over the phone and enter into computer.
2) pull credit...if the score meets the requirement move to step 3.
3) go ahead and get an automated value for the property and enter it into the computer
3) make sure you have stated enough income to keep the debt ratio under 45%.
4) send the loan through Fannie Mae's underwriting system to get "Super" loan approval without having to verify the income, assets, and no physical appraisal..Brilliant!
Because if you just put a value based upon what the Borrower thinks their property is worth and you send it through Fannie Mae's automated underwriting it may get approved with that value. You excitedly call your customer and say..."Congratulations, you are already approved. Since your credit is so great...we don't need any documentation or even an appraisal". But what happens when the automated value is different than what the customer thinks the property is worth? If you enter the automated value and Fannie's automated underwriting doesn't like it...then it would red flag the whole loan for excessive value or cut your value where you may have a loan to value problem. No one wants red flag's on their loans or value issues. If you pull the automated value first as suggested in step 3 above, you can see if their is a potential problem ahead of time. Good deal, right? Actually, the system was set up for check and balances against over-inflated appraisals or potential for values exceeding loan amounts. By reversing the steps you circumvent that process. Brilliant!!..hmmm?
Why do you have to keep the debt ratio under 45%...well, because if it was higher it wasn't eligible for a "Super" loan. I know your next question will be..."well what if the income they told you that they made causes the debt ratio to exceed 45%?"....my answer comes from the Mortgage Devil...in his words...you "just bump up the income to make sure it is under 45%". Duh!! It's so simple...and so fraudulent at the same time. He honestly didn't see where this was a problem. You "just bump up the income!"....that was his war-cry that day. Ok....so, we learned today how to turn a Fannie Mae loan into a Liar's Loan....and still charge a higher interest rate to gain more commission...got it!!
Monday, May 3, 2010
We Sell Money: Part II Liar's Loans, The Ninas
Even people living in a van down by the river have heard of Liar's Loans and some of these van dwellers may have actually gotten one at some point, hence their new digs. When I first encountered the media's reporting on sub-prime loans I observed that they really didn't get it and this trend continues with their coverage of Liar's Loans. I offer this post so that you might educate yourself as I shock and awe you with tales of giving Liars money.
These loans came in many forms and were known throughout the mortgage industry by acronyms. As with most things in the world, the longer the acronym the more fucked up the description behind it.
What the media refers to as liar's loans were mortgages made to people without verifying whether at least some of the information on their loan application was actually true. A typical loan application(1003) was four pages long and contained information as simple as name, property address, birth date, social security number, employer, income, assets, liabilities, other properties owned, address history and required the signature of the loan officer and the borrower. The reason the loan application is known as a 1003 in the industry is that it is actually Fannie Mae form number 1003.
Most people who have a mortgage loan probably provided myriad paperwork and documentation to get their money, but between 2003 and 2007, quite a few people were able to get money with a driver's license and credit score and nothing else.
The Liar's loan that sensible people will find most shocking is the No Income, No Asset, No Employment loan or what the industry referred to by the very descriptive acronym of NINANE. I used to sing song the acronym so that it came out like Nina Nee, which sounds like the name of someone who should be rocking out in Minneapolis with Prince rather than the name of a loan product so ridiculous that even a complete moron knows it doesn't make sense.
The Nina Nee loan didn't just stop at allowing you to not provide proof of your income, assets, and employment, no that just wasn't risky enough for Nina Nee. Nina Nee didn't even want you to write this on your loan application, it literally was a loan application that was more than fifty percent blank. If the loan could talk, then Nina Nee was saying, "I don't want to hear about your job and ability to repay this loan. I just want to know that you have a social security number and a credit score. Details, Schmetails." Imagine lending hundreds of thousands of dollars to someone with the implicit assumption that they had no money and no job.
In defense of this loan, it did require a down payment or some equity in your home, so it wasn't risky to the degree of say, oh I don't know, lighting a match after dousing yourself in gasoline. I only did one Nina Nee during my time in the industry and it was for a gentleman who had a perfect credit score but thought it was a complete invasion of his privacy to ask for any of his personal information. He was one of my favorite customers ever, he actually owned a company and made a fortune. He just didn't trust banks, the government, postal workers, people who drove minivans, the color yellow...I guess pretty much everyone and everything. Oddly enough, he is one of the few customers that I am absolutely positive has still not defaulted on his loan, go figure.
The best I can figure is that the Nina Nee was invented for drug dealers or people in witness protection because they wouldn't qualify for Nina Nee's cousin, Nina. The Nina was a slightly less risky loan where you didn't have to tell us whether you had money or what you earned but we at least asked that you tell us where you worked. So if you were a drug dealer and you came to me for a loan, I couldn't get you a Nina unless I thought I could convince an underwriter that you were a self employed Pharmaceutical Sales Rep. The scary thing is that if a drug dealer did call me and ask for a loan and he could get an accountant to say he was self employed in pharmaceutical sales, I could have gotten him a Nina instead of the Nina Nee. For the record, I never did list a drug dealer as a pharmaceutical sales rep on a loan application, I'm just saying I could have.
Nina was a tool for people who couldn't state their income on the loan application, remember I didn't say verify, I only said state. As an example, if a convenience store worker needed to make $5000 a month to qualify for a loan he wouldn't be able to do a stated income loan because no underwriter would believe that the income made sense for the job title. Nina was so generous that if a convenience store cashier had great credit and wanted to refinance or purchase, the underwriter would simply call the company and verify that they had a job and not even calculate debt to income ratios to see if the loan made sense.
I did one Nina at the Bank of Hell that sticks out in my mind because it forced me to have a meeting with my Operations Manager and the Mortgage Devil at the same time in the tiny little closet she called an office. These occasions were so awful that I typically left the meeting and immediately went in search of alcohol. Fortunately, there was a lot of liquor hidden in the break room so sometimes you didn't have to go far.
I had some friends that were moving to Florida to be closer to aging parents and were selling a home in a overbuilt beach development. I submitted the loan to my bat shit crazy processor/underwriter who apparently complained to both my bosses about how she was going to have to package it up and send it to Dante's Inferno to be underwritten. Apparently she didn't feel that it was her job or that she had the time but really, she just didn't want anyone in corporate to be aware of her inherent laziness and corner cutting. Here is my best recollection of that meeting:
Operations Manager: "Why do you have to do these crazy loans that have to get sent to corporate to be underwritten? It is much more work for Bat Shit Crazy to get these files in order and ship them there than it is for normal loans we can underwrite here in the office."
Mortgage Devil: "And I don't understand why you are doing this loan as a NINA on a primary residence when you could just say it is a second home and do it as a stated income loan."
Turdy: "Well, I am submitting it as a primary residence Nina because they are actually going to live in the home, which makes it a primary residence. I can't do stated income because we have no idea how much money he will make in his contracting business in Florida because we don't have a two year history to support it. Oh and I guess, there is also the hurdle of having to explain why they are selling their primary residence here if they are really buying a second home?"
Mortgage Devil: "Duh. That is why we have the exception process through the bank, all you need to do is list it as a second home on the application and under the real estate owned section, just don't mention the house is pending sale. Then you can finance them at 100% in Florida so that they don't need the money they are getting from the sale of their house here to put down on their new home. Then it can be underwritten here and won't force us to have to deal with the underwriters in Dante's Inferno. Problem solved."
Turdy: "So let me see if I understand what you two are saying to me. You want me to lie about the purpose of the loan and the income of the borrower because it would be easier for me to do that than for Bat Shit Crazy to have to deal with Dante's Inferno and the extra work of sending a loan there?
Operations Manager: "I don't understand why you always have to be so difficult and seem to have such a hard time just doing things our way. Do what you want, Bat Shit Crazy will send it to Dante's Inferno just don't expect it to close anytime soon."
I'm not going to get into the exception process at the bank right now because if you are anything like me, you have a maximum amount of craziness and nonsense that you can tolerate in one sitting and I would like to keep you around as a reader. I will say this, though. The Mortgage Devil encouraging me to commit fraud and cut corners was a regular occurrence. This was a man who once did a stated income loan (not a Nina or a Nina Nee) for two retired borrowers on social security. WTF? Can you imagine a stated income loan where the maximum amount a person could possibly earn is a Google search away? Doesn't it make you wonder why an underwriter didn't stand up and say, "Seriously, Mortgage Devil. If you have to state income for someone on a fixed income, they probably shouldn't be buying the property." No underwriter said this because the Bank of Hell gave him an exception to do what is possibly, one of the most egregious liar's loans I have ever heard of.
The subtext of the conversation above is subtle so I must point out what I know now. The Mortgage Devil and his operations manager, as well as the local processing and underwriting staff, did not want loans going to corporate and for good reason. The more loans corporate saw, the more attention the branch would get at corporate, and the more likely they would be to start investigating the goings on. There will be much more on that in later posts...
I guess my problem with the media's coverage of Liar's loans is that it misleads the public by insinuating that anyone who got a loan without verifying some information on their loan application or any loan officer who submitted these loans committed fraud. This is not the case. In fact, the least fraudulent loan in the entire world is the Nina Nee. How in the hell can you commit fraud if you don't even ask any questions that the customer can lie about? That is not to say that fraud didn't go hand in hand with these loans to some degree but the level of fraud involved in these loans ranged from the egregious to what many in the industry liked to call the grey area.
I might have a few customers living in vans down by the river, it would not shock me. What might shock you is that the Ninas were not the riskiest loans we did at the Bank of Hell, some of the riskiest were Fannie Mae prime products and bank portfolio products. Stay tuned, we are getting ready to take our thumbs out of the dike that protects you from the St. Crazy River.
These loans came in many forms and were known throughout the mortgage industry by acronyms. As with most things in the world, the longer the acronym the more fucked up the description behind it.
What the media refers to as liar's loans were mortgages made to people without verifying whether at least some of the information on their loan application was actually true. A typical loan application(1003) was four pages long and contained information as simple as name, property address, birth date, social security number, employer, income, assets, liabilities, other properties owned, address history and required the signature of the loan officer and the borrower. The reason the loan application is known as a 1003 in the industry is that it is actually Fannie Mae form number 1003.
Most people who have a mortgage loan probably provided myriad paperwork and documentation to get their money, but between 2003 and 2007, quite a few people were able to get money with a driver's license and credit score and nothing else.
The Liar's loan that sensible people will find most shocking is the No Income, No Asset, No Employment loan or what the industry referred to by the very descriptive acronym of NINANE. I used to sing song the acronym so that it came out like Nina Nee, which sounds like the name of someone who should be rocking out in Minneapolis with Prince rather than the name of a loan product so ridiculous that even a complete moron knows it doesn't make sense.
The Nina Nee loan didn't just stop at allowing you to not provide proof of your income, assets, and employment, no that just wasn't risky enough for Nina Nee. Nina Nee didn't even want you to write this on your loan application, it literally was a loan application that was more than fifty percent blank. If the loan could talk, then Nina Nee was saying, "I don't want to hear about your job and ability to repay this loan. I just want to know that you have a social security number and a credit score. Details, Schmetails." Imagine lending hundreds of thousands of dollars to someone with the implicit assumption that they had no money and no job.
In defense of this loan, it did require a down payment or some equity in your home, so it wasn't risky to the degree of say, oh I don't know, lighting a match after dousing yourself in gasoline. I only did one Nina Nee during my time in the industry and it was for a gentleman who had a perfect credit score but thought it was a complete invasion of his privacy to ask for any of his personal information. He was one of my favorite customers ever, he actually owned a company and made a fortune. He just didn't trust banks, the government, postal workers, people who drove minivans, the color yellow...I guess pretty much everyone and everything. Oddly enough, he is one of the few customers that I am absolutely positive has still not defaulted on his loan, go figure.
The best I can figure is that the Nina Nee was invented for drug dealers or people in witness protection because they wouldn't qualify for Nina Nee's cousin, Nina. The Nina was a slightly less risky loan where you didn't have to tell us whether you had money or what you earned but we at least asked that you tell us where you worked. So if you were a drug dealer and you came to me for a loan, I couldn't get you a Nina unless I thought I could convince an underwriter that you were a self employed Pharmaceutical Sales Rep. The scary thing is that if a drug dealer did call me and ask for a loan and he could get an accountant to say he was self employed in pharmaceutical sales, I could have gotten him a Nina instead of the Nina Nee. For the record, I never did list a drug dealer as a pharmaceutical sales rep on a loan application, I'm just saying I could have.
Nina was a tool for people who couldn't state their income on the loan application, remember I didn't say verify, I only said state. As an example, if a convenience store worker needed to make $5000 a month to qualify for a loan he wouldn't be able to do a stated income loan because no underwriter would believe that the income made sense for the job title. Nina was so generous that if a convenience store cashier had great credit and wanted to refinance or purchase, the underwriter would simply call the company and verify that they had a job and not even calculate debt to income ratios to see if the loan made sense.
I did one Nina at the Bank of Hell that sticks out in my mind because it forced me to have a meeting with my Operations Manager and the Mortgage Devil at the same time in the tiny little closet she called an office. These occasions were so awful that I typically left the meeting and immediately went in search of alcohol. Fortunately, there was a lot of liquor hidden in the break room so sometimes you didn't have to go far.
I had some friends that were moving to Florida to be closer to aging parents and were selling a home in a overbuilt beach development. I submitted the loan to my bat shit crazy processor/underwriter who apparently complained to both my bosses about how she was going to have to package it up and send it to Dante's Inferno to be underwritten. Apparently she didn't feel that it was her job or that she had the time but really, she just didn't want anyone in corporate to be aware of her inherent laziness and corner cutting. Here is my best recollection of that meeting:
Operations Manager: "Why do you have to do these crazy loans that have to get sent to corporate to be underwritten? It is much more work for Bat Shit Crazy to get these files in order and ship them there than it is for normal loans we can underwrite here in the office."
Mortgage Devil: "And I don't understand why you are doing this loan as a NINA on a primary residence when you could just say it is a second home and do it as a stated income loan."
Turdy: "Well, I am submitting it as a primary residence Nina because they are actually going to live in the home, which makes it a primary residence. I can't do stated income because we have no idea how much money he will make in his contracting business in Florida because we don't have a two year history to support it. Oh and I guess, there is also the hurdle of having to explain why they are selling their primary residence here if they are really buying a second home?"
Mortgage Devil: "Duh. That is why we have the exception process through the bank, all you need to do is list it as a second home on the application and under the real estate owned section, just don't mention the house is pending sale. Then you can finance them at 100% in Florida so that they don't need the money they are getting from the sale of their house here to put down on their new home. Then it can be underwritten here and won't force us to have to deal with the underwriters in Dante's Inferno. Problem solved."
Turdy: "So let me see if I understand what you two are saying to me. You want me to lie about the purpose of the loan and the income of the borrower because it would be easier for me to do that than for Bat Shit Crazy to have to deal with Dante's Inferno and the extra work of sending a loan there?
Operations Manager: "I don't understand why you always have to be so difficult and seem to have such a hard time just doing things our way. Do what you want, Bat Shit Crazy will send it to Dante's Inferno just don't expect it to close anytime soon."
I'm not going to get into the exception process at the bank right now because if you are anything like me, you have a maximum amount of craziness and nonsense that you can tolerate in one sitting and I would like to keep you around as a reader. I will say this, though. The Mortgage Devil encouraging me to commit fraud and cut corners was a regular occurrence. This was a man who once did a stated income loan (not a Nina or a Nina Nee) for two retired borrowers on social security. WTF? Can you imagine a stated income loan where the maximum amount a person could possibly earn is a Google search away? Doesn't it make you wonder why an underwriter didn't stand up and say, "Seriously, Mortgage Devil. If you have to state income for someone on a fixed income, they probably shouldn't be buying the property." No underwriter said this because the Bank of Hell gave him an exception to do what is possibly, one of the most egregious liar's loans I have ever heard of.
The subtext of the conversation above is subtle so I must point out what I know now. The Mortgage Devil and his operations manager, as well as the local processing and underwriting staff, did not want loans going to corporate and for good reason. The more loans corporate saw, the more attention the branch would get at corporate, and the more likely they would be to start investigating the goings on. There will be much more on that in later posts...
I guess my problem with the media's coverage of Liar's loans is that it misleads the public by insinuating that anyone who got a loan without verifying some information on their loan application or any loan officer who submitted these loans committed fraud. This is not the case. In fact, the least fraudulent loan in the entire world is the Nina Nee. How in the hell can you commit fraud if you don't even ask any questions that the customer can lie about? That is not to say that fraud didn't go hand in hand with these loans to some degree but the level of fraud involved in these loans ranged from the egregious to what many in the industry liked to call the grey area.
I might have a few customers living in vans down by the river, it would not shock me. What might shock you is that the Ninas were not the riskiest loans we did at the Bank of Hell, some of the riskiest were Fannie Mae prime products and bank portfolio products. Stay tuned, we are getting ready to take our thumbs out of the dike that protects you from the St. Crazy River.
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