Of Course Predatory Lenders Have Returned As Loan Modifiers

July 20, 2009

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Of Course Predatory Lenders Have Returned As Loan Modifiers

happy couple home Courtesy of Joe Weisenthal at Clusterstock

This NYT article about how the old gang of "predatory lenders" has returned as mortgage modifies will make you want to barf all over your keyboard.

Pretty much the only line you need is this one:

Chris Mozilo, nephew of Angelo R. Mozilo, the former chief executive of Countrywide Financial — a name synonymous with the subprime disaster — recently started a new business, eModifyMyLoan. It sells software that homeowners can use to apply for loan modifications.

Chris Mozilo worked at Countrywide for 16 years. “I’m very proud of my career in mortgage lending,” he said. “We helped millions of people achieve the goal of homeownership.”

Again, barf.

The rest is filled with the already-classic stories of people down to their last dollar, forking over cash to a loan modified, but then not getting any help, and then having their homes foreclosed on.

But there’s one thing the article doesn’t ask: why is the loan modification game attracting the same set of sleazeballs?

The answer: Because loan-mods are just subprime, predatory loans under a new name. When you’ve got someone who can barely afford their home, and you promise to reduce their payment in exchange for bigger payments down the road (you know, when the housing market has recovered and they have a good paying job again) all you’ve done is recreate the old model.

So it’s not just that the old gang has found a new racket. It’s that the old gang has had their market rebuilt — with the government’s approval — and they’re getting work again.

But to make that point, the Times would’ve had to question the wisdom or intent behind loan mods, something few are doing yet.