Posted Aug 27, 2007 06:26 pm CDT
Borrowers with bank accounts obviously are better mortgage risks than those with no assets. Yet, until last year, the nation’s biggest lender reportedly set up its computers to exclude applicants’ cash reserves.
This was intended to encourage Countrywide Financial Corp. representatives to pitch applicants on pricier mortgages that reaped a bigger profit for the company, writes the New York Times in a lengthy article on the company’s lending practices. (Company representatives also routinely told borrowers “I want to be sure you are getting the best loan possible,” the newspaper says.)
Although Countrywide takes pride in being the nation’s No. 1 lender to minorities and helping them achieve the American homeownership dream, New York regulators accused the company of overcharging such borrowers. The company agreed late last year to compensate blacks and Latinos who improperly received high-cost loans in 2004, the Times reports.
Now that a downturn in the real estate market that has led to dramatically increased foreclosures and increased scrutiny by securities and banking industry regulators, Countrywide’s lending practices—and those of other financial institutions—are big news.
But “few companies benefited more from the mortgage mania than Countrywide, among the most aggressive home lenders in the nation,” the Times writes. “As such, the company is Exhibit A for the lax and, until recently, highly lucrative lending that has turned a once-hot business ice cold and has touched off a housing crisis of historic proportions.”