What We're Hearing

Just how bad was the loan underwriting at some top ranked mortgage firms during the 'go-go' years? I recently heard from a former internal auditor at Countrywide Home Loans in Plano, Texas, who was asked to look at mortgages funded by CHL's subprime division, Full Spectrum Lending. He said that what he examined "horrified" him. "I'm an accountant by training," he told me "and had always been taught that financial transactions should make sense. But the approval process by that time seemed to be checking for a pulse. That was all. We even told applicants what to drop off the application so we could pass them. I remember one loan officer hanging up the phone after a 'successful' close and remarking to his co-workers 'If they last six months in that house, I will be surprised.'" Of course, Countrywide's problems are now the problems of Bank of America. Meanwhile, the new job numbers come out on Friday. The only reason I mention this is because maybe the Treasury Department doesn't quite understand the concept of "loan modification." A servicer can't modify a loan if the home owner doesn't have a job...