What do Governor Gregoire's actions mean for local Countrywide employees and short selling homeowners?

Is Governor Gregoire just a little too late in regards to Countrywide’s lending tactics? Aren’t we merely days away from the Bank of America takeover?

As I drove back to the office today after teaching yet another short sale class, I heard the news on KIRO 710 AM that Governor Gregoire is seeking to pull Countrywide’s lending license because of an investigation that uncovered predatory lending practices aimed at minorities.  WA State will fine Countrywide 1 million dollars for discriminatory lending practices and attempt to collect an additional 5 million for back assessments due.

From Governor Gregoire’s website:

DFI is required to examine every home-lender licensed in the state of Washington. The agency conducted its fair lending examination of Countrywide last year. At that time, DFI looked at roughly 600 individual loan files and uncovered evidence that Countrywide engaged in discriminatory lending that targeted Washington’s minority communities. The agency also found significant underreporting of loans during its investigation.

“The allegation that Countrywide preyed on minority borrowers is extremely troubling to me,

86 thoughts on “What do Governor Gregoire's actions mean for local Countrywide employees and short selling homeowners?

  1. But, WAMU gets a free pass? I get this silly cartoon in my head picturing Kerry Killinger hiding behind Gov. Gregoire like a cowering small child peering behind their mother or father’s knee, snickering, “yeah, get Countrywide, get Countrywide!”

  2. I emailed DFI and asked that question: Will BOA be liable for the 6 million in fines?

    When one corporation purchases another, I am under the assumption that they cannot simply just purchase the assets and avoid paying the liabilities.

    If that were the case, then why not let the corporation go into bankruptcy and pick off the assets through the bankruptcy liquidation?

    I am going to assume that BOA will have to pay this fine. Please readers, feel free to correct me if I’m mistaken. Thank you!

  3. I vote we toss out all of our elected officials and start fresh. Oh wait, we do have elections coming up…this couldn’t possibly be a little grandstanding, could it?

    Most of the recent legislation (also passed 11th hour) and this just is stinky.

  4. Well inside the “Statement of Charges” you can see that DFI started their investigation as part of a routine examination (audit) of Countrywide’s operations back in 2007 so I’m not entirely convinced that we could call this political grandstanding.

    Once a state regulator sees concerns, this means the examiners will (and should) look further into the company operations.

    It doesn’t matter if it was Countrywide or any other lender under the jurisdiction of DFI, I believe DFI would have issued the same penalties (for the same violations) perhaps sans the press conference.

    I am not offended by the politics involved. That’s par for the course. Instead I LIKE it when we get media coverage on an issue like this.

    In relation to the subprime meltdown, I read many comments from RCG readers like this: “Well the consumer should have known better….the consumer should have read their loan documents…what about personal responsibility…” The media can help play a part in educating the consumer.

  5. I’m pretty sure that BOA would be responsible for the fine, unless perhaps the merger takes them out from under the jurisdiction. But I do have to wonder the point of all this given the takeover.

    People with legitimate claims under TILA or whatever would still have them. Publicize that and let them assert it themselves.

  6. In the interest of full disclosure, I once worked at Countrywide. I’m no big fan of theirs, but I do not wish to see blind justice run amok, for the sake of political grandstanding, and let stand allegations that they pursued a policy of ethnic discrimination in lending.

    DFI claims to have proof that a protected minority got worse terms than a control group.

    I could not draw that conclusion from the data I viewed (the control group loans looked significantly different from the target loan), but I concede it may be true.

    To begin with, I think that everyone in the lending business can agree that some individuals get better loans than other people, even when ALL loan risk factors are considered.


    Here are the main reasons.

    1. There are different levels of profit that a lender is willing to accept to get the deal. While there may be a suggested retail price (or preferred profit margin), that is often not the price that is actually charged. In my experience at CW, the actual price charged was usually lower, as the retail price was often not perceived as competitive.

    2. Generally, we assume that the retail price is the maximum price, and allow the careful shopper to try to get a price that is less than the retail price.

    3. Some borrowers are willing to devote more time than others to accumulate information to allow them to comparison shop. In general, those people will get better loans and pricing than those who do not. Most will receive an adequate return on their investment of time.

    Unless we want our government telling lenders that they cannot negotiate terms with borrowers, we have to accept that some people will get better terms than others. The alternative is COSTCO style lending: one price, one product, buy it, or leave.

    Honestly, I think government thinks that’s how lending should work. Maybe they are right, but that certainly is not how it DOES work.

    Now, let’s examine whether a lender, or individuals working at a lender, are intentionally targeting a protected minorty and charging them more than an unprotected group.

    First, most loan originators just want to make a loan. That what they get paid for. They don’t care (nor should they) whether the borrower belongs to a protected class or not. It’s not like CW paid a bonus for loans to a protected class, nor did the pay significantly differ according to the terms or the profitability of the loan (at least it did not when I was there). Never did I have a supervisor look at the ethnicity of an application and suggest that the terms be adjusted accordingly.

    The state seems to think it has proven that CW intentionally gave poorer terms to a protected minority class.

    Unless the state can prove that the protected group consitently paid MORE than the RETAIL price, I do not think there should be an action against CW for this charge. Otherwise, let’s all concede that shopping for the best loan terms is illegal.

    Now, CW not paying its full assessment (short by $5M!), that’s just dumb. Pay up. Get it now while the gettins good!

    But let’s NOT accuse this company of a discriminatory policy, when it does not appear to exist, even if it does fatten up the state coffers, and shine up the resume of ambitious public servants.

    And forcing the CW out of the state is dumb ALL the way around. They have good products, and decent rates, at least on the wholesale side, and it just seems immensely foolish to deprive the residents of the state access to the services of one of the nation’s largest lenders.

    So, Angelo, maybe now you’ll send me the money you cheated me out of when I left? Hey, I just want to be Friend of Angelo too!

    Well, maybe not so much these days. 🙂

  7. Hi Roger,

    Thanks for your insights. There is one part that troubles me:

    “They don’t care (nor should they) whether the borrower belongs to a protected class or not.”

    I have to loudly disagree on this one. Having spent the better part of 2007 in the class room with hundreds if not eventually thousands of loan originators, my experience is that the entire industry has done a horrible job of training our retail mortgage salespeople during the bubble run-up. We gave them a laptop, a rate sheet, a pile of leads and told them to go make six figures.

    The vast majority of LOs in my classroom who entered the industry during the past 10 years had never heard of the Equal Credit Opportunity Act. In fact, I had one guy who had been originating for 5 years and, when seeing ECOA on the board, thought I was going to be lecturing about the Ecoli virus since he had never heard of ECOA.

    Loan originators, no matter where they work, absolutely should care whether or not a borrower is a member of a protected class. Anyone who takes a loan application should have all of the protected classes memorized. Our borrowers are to be treated the same.

    DFI DOES HAVE PROOF that people from a protected class received less favorable rates and terms when compared with the control group. This is why they’ve issued the Statement of Charges. I heard on the news tonight that they’re giving C-wide 20 days to respond before the issue their Consent Order.

    Forcing CW out of the state ought to frighten the hell out of any other lender currently engaging in similar business practices.

    The state is doing what we are paying them to do. I hear so many complaints from existing mortgage folks about how nobody is doing anything about “predatory lending.”

    Now DFI does something and we call it political grandstanding?

    That’s unfair.

  8. I mostly agree with Roger and I treat all borrowers equally so to me it doesn’t matter what color you are. Many of my clients, I never meet (which is amazing to me)…so I often don’t have a clue as to what someone’s race is.

    Some transactions are more challenging and some are easier than others–LO’s should have the right to be compensated factoring that.

    I just hope DFI is right (regardless of what my personal opinions are of CW). If I were a Countrywide LO, and this turns out to not be true, I would want to take action against the State as this will potentially damage their careers.

  9. Unless all the suspect loans are by one or two employees, I’d suspect a different reason for any discrepancies, something like education level, or prior experience obtaining loans. To have a company-wide system that would be based on race isn’t that likely. And really, I just don’t see it on an individual employee basis either, unless that person came to the company with extreme prejudices. If an employee was willing to make “bad” loans to some people, I’d think that they’d be willing to make such loans to everyone they came in contact with that would fall for it.

  10. OK Jillayne, I’ll bite.

    I would prefer NOT to know ethnicity, gender, or racial characteristics, but the government requires that I make this unpleasant and intrusive inquiry. Before long, I will probably be required to inquire of the borrowers sexual habits/orientation.

    According to your theory, a loan originator should consider a person’s ethnicity, gender, or racial characteristics when originating a loan, and adjust the characteristics of the loan according to some formula, to ensure that the class, or classes, are not getting worse terms than others.

    I find that concept personally abhorrent, and immoral.

    That suggests that I would be required to tell a careful shopper “I’m sorry, but you are NOT a member of a protected class, so I cannot give you the lower than retail deal that you desire, and that my supervisor has deemed is profitable enough for the company. If you become a member of a protected class in the future, I may be able to help you with a lower than retail deal.”

    I never disputed that DFI has evidence that protected class members got poorer terms, I just claimed I did not see it in the examples provided. Actually, I am absolutely positive that members of protected classes, in aggregate, get poorer terms. I just disagree with DFI on the reasons for it occurring, and whether we have an appropriate solution for the disporportionality.

    According to the Seattle Times article this morning,

    “The Department of Financial Institutions began analyzing individual loans, and identified a pattern of lending that resulted in minorities obtaining more costly loans, but did not show that they were targeted for those loans because of their race or ethnicity. Interviews conducted with homeowners showed that in some cases, homeowners were sold costly loans by a broker with the same ethnicity, Bortner said.

    “The reason minority borrowers are disproportionately affected is because economics creates disproportionality,” said Winona Hollins-Hauge, a member of King County’s Commission on African American Affairs.”

    I find I can agree with each statement:

    1. There is a pattern showing minorities received poorer terms.

    2. There was no evidence of targeting

    3. Some minority brokers gave poorer terms to minority borrowers.

    4. Life/economics is not fair.

    I am puzzled by Bortner’s reference to broker’s ethnicity. Where did broker’s activity get studied? Is there a box on the application that I don’t know about that identifies the ethnicity of the loan originator?

    I thought this was a study of Countrywide retail practices. The information doesn’t seem to indicate one way or the other.

    Does anyone know?

    The quote from Hollins-Hauge borders on the cryptic. Isn’t economics the study of disproportionality and fairness?

    I disagree that throwing Countrywide out of the state benefits state residents. It does benefit their competitors.

    Any study conducted regionally will conclude that protected class members receive poorer terms, in aggregate, than non-protected classes, from EVERY lender who actually offers loans to protected class members.

    If we apply the same study to ALL lenders in this state, you will find the same pattern, and will conclude that we should throw all lenders out of the state.

    That is foolish.

    Personally, I have often been frustrated when a member of a protected class would decide to take POORER terms from a competitor (this is happens more frequently now that I am on the wholesale side). Despite my efforts to show that I had the better terms (in my opinion, of course), the borrower would choose a different direction

    But I would NOT support legislation that would deny the individual borrower the ability to make that decision. If that borrower WANTS to make that choice, should they not be allowed to?

    for instance, if the borrower wishes to take a loan from a broker of the same ethnicity at poorer terms, should they be legally barred from doing so? Now, are we not discriminating against the ethnically protected broker?

    This is STOOPID!

    Quit providing preferential treatment to ANYONE based on race, ethnicity, gender, sexual orientation, country of origin, or any other characteristic that is not directly related to the risk of the loan, and quit asking the questions related to it. It is offensive to anyone that believes in equality of races.

    Borrowers are entitled to become as informed as they want to, and empowered to negotiate the best terms that they can.

    I am happy to help ANYONE get the best possible terms, and I really do not care, nor should I, what characteristics you have that are not directly related to the risks/pricing of the loan.

    But, because the law requires it, I am required to ask. I ask for your forgiveness in this regard, in advance.

    Kary, I am only a fan of Countrywide in the sense that they offer more choices than some other lenders, and at least on occassion from the wholesale side, provide the best terms for an individual borrower.

    I found I was at odds with the management philosopy in a number of areas (including appropriate compensation for my labor!), so I left the retail side, and went wholesale.

    As a wholesale lender, I do not find them any more distasteful than any other lender….well, except Angelo kinda gives me the creeps!

  11. Hello,

    My husband and did a refinance two years ago with C-wide but for some reason we have a high interest rate and are facing an increase of $200 on a arm starting in July. I would like for my records to be reviewed. Anyone have a suggestion who I contact?

  12. Jillayne:

    Rhonda asks” I didn’t realize that Countrywide was under the CLA… are there any other big mortgage/banks that are also under CLA?

    My understanding is that lenders can be regulated by the state under the Mortgage Broker Practices Act, the Consumer Loan Act, or as a Bank, or some combination of the three.

    Could you provide a explanation of what makes a lender designated as one type or the other? And what the implication of that designation may be?

    Or point to an authorative and comprehensive source?

    I had thought that Countrywide was a bank, as I believe they are a depository lender (that is, they accept deposits, and pay interest on those deposits), and would be regulated as such.

    I know, you don’t work for free, but despite our disagreement on some fundamental philosophies, and large agreement on others, you are one of the few public authors that addresses these matters, in a generally factual way. I hope that does not come across as damning with faint praise, that is not the intent.

    BTW, did anyone notice or comment on the AP suit against bloggers using AP source material?

  13. Katherine:

    We are not supposed to directly solicit for business on this site, so as a lona originator, I offer the following generic suggestions.

    1. If your rate is adjusting, it probably also means that any prepayment penalty associated with your loan is expiring as well. Let’s hope so.

    2. You could contact any competent mortgage professional to see if you qualify for better terms than you currently have. You should go over the details of your current loan carefully, because in some instances, the loan you have may be superior to the loan you get offered.

    3. You could contact DFI and inquire if you are entitled to any compensation. They do not make loans, nor do they modify existing loans.

    4. You could contact CW and see if they will modify the terms of your loan. Chances are they will, but they will essentially put you in a new loan, and charge you fees to do so. They have probably offered you that opportunity repeatedly. They probably do not offer the best terms available in the market for your situation.

    Not knowing more about your situation, I would not know which is the best course of action.

    However, I would generally suggest that if you (or similar borrowers) contacted a lender in the private sector, the results you seek, and the outcome you desire will generally be faster, and superior to waiting for the government to fix something, or get you compensation at some future date.

    No slam against government, it’s just the way it is.

  14. I just noticed a direct conflict in statements.

    The Guv states that CW “targeted minorities”, while the statement in the paper says the exact opposite.

    “…but did not show that they were targeted for those loans because of their race or ethnicity.”

    So which statement is true?

  15. Jillayne said: “I have to loudly disagree on this one. Having spent the better part of 2007 in the class room with hundreds if not eventually thousands of loan originators, my experience is that the entire industry has done a horrible job of training our retail mortgage salespeople during the bubble run-up. We gave them a laptop, a rate sheet, a pile of leads and told them to go make six figures. ”

    So. Clearly the problem is with the institutions themselves, not just Countrywide, but virtually all of them. They chose to ignore basic economic rules, encouraged new employees or 1099 folks to sell loans with little or no supervision, little training, and created a huge economic burden for the entire country. Whether greed or plain stupidity the economic problem is massive, and unbelievable that it even happened.

    Entire neighborhoods in some parts of the country are empty. I find this amazing – how could so many supposedly sophisticated money managers have made the decision to simply copy each other and ignore the consequences? Are there that many dishonest people in positions of power within these firms wheeling and dealing for their own benefit? The problem wasn’t created by just a few people, but by many.

    And, why isn’t Congress forcing them to re-write the loans they put in place that are causing the intensity of damage? The investors who bought the layered papers, good, badbadbadbad,good,badbadbadbad,good … is sort of how I imagine it :-). But, the investors are also culpeable. They HAD to have known the risk was huge. To keep quiet and continue is fraudulent.

    Some say the consumer is equally to blame by also being greedy and many of them lied to get their loans. The fraudulent buyers certainly are part of the overall problem, but the majority of the foreclosures don’t appear to be from the big-time fraudulent cash-back buyers. Most of the foreclosures are simple people who thought they could join the homeowners club, and make money just like everyone else.

    It’s not fair, right or moral to punish the least sophisticated of the group the most. The top is where the punishment must be pointed.

    The ripple effect of home prices spiraling downward and loss of jobs from many in the economies affected by real estate is dangerous. Just allowing it to happen without consequences to those who participated in the creation of the problem is a major mistake.

    I can’t blame consumers who are rejecting paying a mortgage on a property that may be worth many tens, or hundreds of thousands less than what the loan balance is.

    It’s a certain signal that the lenders no longer have respect from consumers — and it’s a well deserved lack of respect.

  16. Katherine, I suggest contacting a mortgage professional in your local area. They should be more than happy to review your Note. Or if you’re concerned that you’ve been wronged, you may want to contact your State’s regulatory department or an attorney.

  17. Leanne, I’m assuming that CW LO’s are W2 employees…but I can’t be certain.

    The paper this morning stated that CW has done 80,000 loans over the past two years, 600 loans seems like a very small pool to sample. I wonder if there’s a percentage that the state uses to determine a mortgage companies business practice?

  18. It is laughable to me that there is no fault being placed with the borrowers in these transactions. Who signed the loan documents? You didn’t understand what you were signing or were confused? Why didn’t you ask questions? (I for one would not sign something I didn’t understand or that was not explained to me in a way that I was completely comfortable with.) The borrower is given right to consult an attorney at any time regarding any of the documents during all parts of the transaction. Who is at fault for them not exercising this right? Our society has go so far to protect the individual that it has removed any responsibilty for the action from the individual and placed it on everyone but the individual.

    These people wanted to buy property that was outside their means and there were loan product out there that would allow them to do this, even if only a short time. These loans were offered by many other lenders besides Countrywide (and still are) and so I agree with Roger is our high and mighty Govenor going to throw all lenders out of Washington? Please! While your at it disallow these lenders parent companies from issuing credit cards to people in Washington State. How many of these cards have the fine print “that I didn’t understand” that allows for a default default rate upwards of 30% for being late on ANY payment not just on the particular card. How many people declare bankruptcy every year because of credit card debt?! Let’s have the government bail them out for this ursury. The borrower wanted the credit period, regardless of the terms they “didn’t understand”. Am I the only one who sees a pattern here?
    “But it’s their home…” No it’s just a nice car or stereo or tv or wardrobe all of which they weren’t able to really afford but some one gave them credit to do it so it’s not their fault because they didn’t understand the terms of their contract…Really! How long to we allow this to continue before we as a society place blame where blame is due? Take responsibility for your actions and stop blaming others for you errant decisions. I am not a “fan” of Countrywide or any other lender but I am a believer taking responsibilty for your actions and suffering the consequences of those actions. These unfortunate individuals are only losing something they shouldn’t have aquired in the first place. This may sound harsh but the truth often hurts.

  19. These lawsuits about discrimination are bunk. They are based on very poor statistical analysis of the data.

    I say this as a loan originator and I am also black. At the end of the day, I would bet in most cases, which was why it was pointed out in the article, the originators of the loans in question are of the same ethnicity.

    In my experience, the easiest marks for shady LOs are those who share the same ethnicity. I know broker shops that focus on working with Hispanics, other shops that work solely with Koreans. Guess what, they are banging the borrowers for the max fees and the LOs and Brokerage owners are the same ethnicity. There is a level of trust that is being exploited.

    Any discrimination is solely done at the Loan Originator level as it is the LO who controls pricing. I have yet to see a rate adjustment for minorities on a rate sheet.

    Borrowers getting taken advantage of comes from a failure to shop around and choose the proper mortgage professional. There is no possible way to rip off a borrower who takes 30 minutes of their time to call two or three loan officers/mortgage brokers before obtaining financing on their largest investment. If my competition is looking to make 3 points on a loan that most LOs will do for 1.5 pts, it will be readily apparent after one phone call.

  20. Naive borrowers don’t know enough to shop around.

    They shouldn’t have been handed loans in the first place.

    So, which came first the chicken or the egg?

  21. Rhonda, you are probably right. I just got my dander up about the CW thing.

    Leanne, good points all the way around, but it’s a fairly intractable problem. I would definitely support accountability from top to bottom, but there are so many people that benefited from the bubble that we could not build enough prisons, nor run enough trials to achieve justice for all. So we will muddle along as best we can.

    Jillayne nailed it a year ago, in an article listing over 50 “culprits” in the bubble, and subsequent meltdown.

    When the entire country gets caught up in a mania or “bubble” (which is the essence of what has happened), how does the nation recover?

    In our recent experience, it has been to migrate to another bubble! From the tech bubble, to the housing bubble, to the current commodities (oil, metal, food) bubble, individuals are free to chase their private dreams and interests.

    The most successful individuals seek the newest bubble on the front of the bubble, and exit at the top, right? Many others do not. Sadly, I’d have to identify myself as an individual who gets into bubbles too late, and hangs on too long, as I am not strictly driven by economic interests. Currently, I find that being in the business is interesting, and has personal rewards that extend beyond the purely financial. I hope I do not have to leave the mortgage business for purely financial reasons.

    My personal recommendation is to pursue the true criminals (fraud), go back to taxing the enormously wealthy, learn to publicly value something other than excessive consumption, and attempt to take our government back from the oligarchs who currently own it.

    But that’s just me…

  22. Russ, if a company shows a pattern of discriminatory pricing against protected classes it doesn’t matter what race its brokers/employees are. Under the law, there’s no difference if a White broker is discriminating against a Hispanic borrower or a Hispanic broker is doing the discriminating.

    National studies have repeatedly shown that minority borrowers (particularly Hispanics & African Americans) pay more for mortgages than similarly qualified Whites. Much of the problem comes from the way brokers price loans. If a broker (even subconsciously) thinks he can grab an extra 50 basis points of YSP with a client or add some junk fees at the last minute, many will do so. Unlike Jillayne, I’m not willing to concede this is a training issue; I think its more about how people approach their jobs.

    In So Cal, many of the CW brokers I ran across transitioned from the car sales business and leveraged that experience to earn their commissions. Because of the complexity of the business, they quickly found that it’s easier to grab some extra YSP at closing than it was to sell an extended warranty.

    I do think this seems a bit like grandstanding but that doesn’t mean DFI’s charges aren’t warranted. You can read the charges at the DFI website, and they have listed detailed cases compared to control groups. At a minimum, CW’s sloppiness and failure to document disclosure requirements will be an easy case for prosecutors.

  23. Roger, your last 2 paragraphs sum it up well, and I share your feeling that this is a business that brings many personal rewards that have nothing to do with money.

  24. Russ:

    Thanks for chiming in with your refreshingly honest perspective. To support your observation of minorities preying on minorities, I offer the case of Liza Bautista.


    By the way, if anyone cares to know, she still remains free, despite her obvious crimes. Too bad. I wonder why? I recently heard of another one of her fraudulent loans bubbling to the surface two years after it was originated. Great. Why didn’t DFI investigate every single one of her loans? The fraud was unbelievably obvious.

    I also happen to think it is tremendously sad that honest minority loan originators may be tarnished by the news stories. It’s not easy for anyone to originate loans, and I cannot be any easier to be a minority originating loans.

    In the interest of full disclosure, I am white, male, not Hispanic or Latino, annoyingly hetero (according to some) and turned 51 yesterday. I have worked with many originators of different characteristics, and have found no correlation between the above traits and ethical behavior, or non-ethical behavior. People are people, wherever you go.

    I ask:

    How does it help matters to create a class of people that are assumed to not know enough to function effectively in the economic marketplace.

    How does it help matters to tell that class that they are NOT responsible for their decisions?

    It does not. It perpetuates the problem. We all know it.

    Let’s decide to move on.

  25. Lastoxnoco:

    I agree that the studies consistently support that minorities get poorer terms. And it should not matter what the ethnicity of the originator is either.

    What I disagree with is why that occurs, and what may be the proper remedy.

    Also, until I hear different, the CW case is about CW retail, not about brokers.

    The sloppiness is usually what gets punished, not the greed.


    It’s like punishing the Nazis for not filling out the forms correctly, instead of those who created the policies.

  26. Lax:

    Unless you are for price fixing, there is no way to change that some people are going to get charged more than others.

    On average, some minorities may wind up paying more than non-minorities for a variety of reasons. However, CORRELATION DOES NOT EQUAL CAUSATION. In other words, just because there may be a statisical correlation between race and interest rates, it DOES NOT mean race causes higher interest rates. Statistics 101. Of course, since most of our politicians were English or Poli Sci majors, they wouldn’t know this. Just like you can’t say foreclosures are up 50% without examining the other factors that may be related to foreclosures. Of course, foreclosures are up… there has been more financing and more people owning homes, particularly people with poor credit. The more people with poor credit that have mortgages, the more likely foreclosures are to rise… duh.

    In addition, I often question the notion of comparing loan files. EVERY mortgage is unique and different with it’s own set of challenges. Getting a home loan is like getting a custom tailored suit – at least if you deal with a professional.

    I deal with very high income clients, many of which are black. I would say on average my black clients probably get slightly higher rates than my white clients even though income and credit may appear similar on the surface. However, upon further and deeper examination they are apples and oranges in many cases. You cannot simply say people with 720 FICO scores and 5% down payment earning $100k all will get the same rate.

    You would have to control for loan size, property type, DTI, lock time, not to mention current interest rate conditions, rate/term vs cashout, and a ton of other factors. It simply isn’t possible.

    My point is simply that I haven’t seen any blatant racism in this business and taking advantage of minorities. What I have seen is that minorities and the elderly often times tend to be more trusting and do not shop around as much which ultimately winds up raising their average interest rates.

  27. Leanne:

    Re #28, do you mean the chicken is the RE agent, and the egg is the lender? Or vice versa? 🙂

    I have counseled plenty of people not to get loans, or stay in the ones they have, to my own financial detriment. I choose to believe there are many others like me.

    As we recover from this national mess, we should not spend TOO much time money and energy finding blame.

    Let’s find solutions. And move forward.

    I believe we can.

    Russ, Hear-Hear (Right On! would sound dated or misconstrued) 🙂 !

  28. laxtosnoco – this case has nothing to do with mortgage brokers–it’s CW retail.

    Jaime is correct IMO the there needs to be more responsiblity put on the borrower. If they want to own a home and have the liability of the mortgage, they need to step up to the plate and have some financial accountability.

    I still hear from consumers who want to buy a house and have a mortgage when they have no ability or track record to show they’re responsible enough. Yet, even with all what’s going on in the industry, they shrug it off. I had one person say something along the lines of “ya, I know my credit’s a mess and my job is unstable, but I still want a mortgage–can I get one?” I’m amazed.

    I agree with Roger (or was it Russ?) who stated that many are taken advantage of by their own race or religion or (fill in the blank)…and that is very sad.

    Great post, Jillayne–with some great comments!

  29. Rhonda & Roger, that’s a good point about this seeming to be related to retail CW operations. Still, just because it is happening at a retail setting doesn’t mean that there couldn’t have been shenanigans.

    I’ve seen CW corporate claim before that they don’t steer people into subprime loans. However, they have said: “Originating a subprime loan is more time intensive than a prime loan and, therefore, Account Executives are compensated for the extra time, effort and resources needed to fund a subprime loan.

  30. You know, discrimination occurs all over the place so it shouldn’t be much of a surprise.

    When I take the car into the lube shop they never tell me my wiper blades need replacing or my cooling system is in dire need of a flush. When my wife takes it in, it doesn’t matter whether I just changed the air filter or wipers myself; they always need replacing.

    Does the lube guy get paid extra for these services? I don’t know, but someone’s applying some pressure.

  31. Jillayne:

    Our experiences are all colored by where we are, and where we have been.

    I was at Countrywide, and experienced their training. It was, by far, the most comprehensive formal training for a particular job as I have experienced. They took great pains to make sure that we understood HMDA and ECOA, and the QC for filling out HMDA seemed diligent to me.

    They seemed committed to complying with the letter and the spirit of the law, at least as far as I could tell (I was new to lending at the time), but I suspect it was as much to cover their liability basis as it was for actual compliance.

    They also seemed committed to making money. For them, at least.

    The group that I worked with in Bellevue were intelligent and decent people, I think all with college degrees. There was a laudable representative variety of women and minorities of nearly all backgrounds common to our area.

    I never saw illegal, fraudulent or discriminatory behavior. What I saw was a company committed to legally maximizing profit, and directing it’s W-2 employees accordingly.

    Ultimately, I discovered that the pricing and products they offered at retail were often not as good as what was available in the wide world of wholesale lending (from them, and so many other companies), and I left.

    I have no regrets about my decision to work there, or the decision to leave 3 years ago.

    You mention that the LO’s that attended your training were ill prepared for lending. They probably were not sent to you from Countrywide, as they were not required to take CE.

    That is not to say that CW did not have ill prepared originators. I attended one national training for a week w/ CW, and was somewhat surprised at the low quality of the trainees from other regions.

    So, they probably did have some bad actors, too.

    I just do not believe (from the evidence that I have admittedly briefly scanned, and my personal experiences) that they were guilty of institutional racism, or intentionally discriminating against a protected class.

  32. Rhonda,
    Regarding your post #2. B of A just announced that they will lay off 7500 employees after the merger with CW is complete. I hope someone took your advice.

  33. laxtosnoco-when I just brought one of our cars in for service because it had the “check engine” light on, the service person said, “well did you look under the hood to see if the engine was still there?” You know he would have NEVER said that to my husband.

    The CW wholesale reps used to call on our office pushing option ARMs and in shock that we would not sell them. Reps were not only had the option to be paid by prepayment penalties, they were also compensated by how high the margin was (which is really gross in my book–how would a consumer ever know that).

    I think it’s important to focus this post on the local retail-branch operations of CW since that’s what this case is all about. I’m so tired of people (especially the media) wrongly pointing fingers solely at mortgage brokers when what they should be saying is “mortgage originator” or “loan originator”. It doesn’t matter if someone works at a bank, broker or correspondent lender–it comes down to that one persons business ethics and model.

    This is why I stress over and over again (and will continue to do so) to select the person who is originating your mortgage and providing you mortgage advice by the individual–hopefully by referal from someone you trust who has had experience w/the individual.

  34. Regarding CW compensation, it was a while back, so I do not remember every detail, and it certainly must have changed several times since, but here’s my 2 cents worth.

    We received a base of $1,500/mo., and some benefits. We were compensated slightly more for certain loan types than others, but the compensation was not directly related to price, rate or loan features like pre-pays or ARMs.

    The variable compensation was largely targeted to the number of loans and the total dollar volume in a month. Work harder, work smarter, make more $$.

    Variations in standard loan pricing and terms had to be requested by the LO, and approved by management. My understanding was that “exceptions” to standard pricing and and terms were subject to a profitability test, there being some floor that was simply not profitable enough. Standard pricing must have been quite profitable, as the exceptions were frequently granted.

    The decision did not rest with the LO.

  35. # 35 Roger, the egg is the widespread changes in mortgage monies that made the chicken get too much easy money, too much easy money made the chicken take too much risk, too much risk made too many foreclosures, which the egg should have known better than to give the chickens too much easy money, and the volume of foreclosures made many lose their jobs, and the egg should have known better about that too, and the chickens that didn’t get the easy money loans still suffered because their home values went down, and some of them lost their jobs too and the eggs should have know better about that too, and so goes the cycle …

    Obviously it is the eggs fault! 🙂

  36. Cathy, ouch! I was just talking with one of my LO buddie’s who works for a bank and she was saying to me “wouldn’t you feel more secure working with me at a bank?” You can probably guess my answer. 😉 I feel much safer working where I do (knock on wood FAST).

  37. As I read through the comments from today, I am noticing talk about “trust.”

    From Rhonda:
    “to select the person who is originating your mortgage and providing you mortgage advice by the individual–hopefully by referal from someone you trust who has had experience w/the individual.”

    From Russ:
    “Guess what, they are banging the borrowers for the max fees and the LOs and Brokerage owners are the same ethnicity. There is a level of trust that is being exploited.”

    “What I have seen is that minorities and the elderly often times tend to be more trusting and do not shop around as much which ultimately winds up raising their average interest rates.”

    Jaime says there should be more personal responsibility on the borrower:
    “taking responsibilty for your actions and suffering the consequences of those actions. These unfortunate individuals are only losing something they shouldn’t have aquired in the first place.”

    The question then becomes, if we know mortgage lending consumers are generally going to lean towards “trusting” the person who they BELIEVE is a professional, then how do we balance that out with personal responsibility?

    I am not an advocate of promoting the idea of a trusted referral to an LO from a friend or family member simply because of the points Roger and Russ and Jaime are making about exploiting that trust and relying on another person to tell you who to chose as your LO, instead of doing that background work yourself.

    Many of these folks who “trusted” their LO (and got burned) did so because they received a referral to that person or they knew them in another setting.

    IF it’s true that LOs want that trust, then the duties that LOs will have to their clients will have to be much higher than they are now.

    Wait a second: If a borrower selects an LO who works for a mortgage broker (in WA State as of 6/12/08) then that borrower CAN chose with confidence, an LO who owes the consumer fiduciary duties, which are much higher than an LO who works for a bank, credit union, or consumer loan lender.

  38. Kary says, “Unless all the suspect loans are by one or two employees, I’d suspect a different reason for any discrepancies, something like education level,”

    Out of the Household Finance class action settlement, WA state did research as to how HFC borrowers fell for their predatory lending tactics. DFI’s research showed that all victims has one thing in common: They all only held a high school diploma.

  39. Hi laxtosnoco,

    I hear that argument all the time, no matter whether it’s subprime or prime…..and now FHA loans: “If a loan takes more time to originate, I charge a higher fee.”

    I thought that with many of the loans out there, toward the end of the bubble run-up, lenders were just doing stated income deals?

    Now please somebody tell me how much more I can charge for putting THAT deal together?

    I’m wondering if this same argument is going to transfer over to FHA loans now.

    Leann wants solutions!

    One solution will be for the true fees earned by the broker and loan originator to become more transparent, and for the broker/LO to be required to disclose ALL INCOME in a clear way so that the consumers Jaime and Russ talk about can shop in an easy and more informed way.

    (Please let’s not go off on a tangent about banks not having to dislcose their servicing release premium. Thank you)

  40. Katherine from comment #18 asks, “My husband and did a refinance two years ago with C-wide but for some reason we have a high interest rate and are facing an increase of $200 on a arm starting in July. I would like for my records to be reviewed. Anyone have a suggestion who I contact?”

    Katherine, gather all your paperwork from when you originally applied for the loan, including all written correspondence from your Cwide loan originator and take it to an attorney. There’s a guy who blogs here on RainCityGuide named Craig Blackmon. His picture is up there on the sidebar. Call his office and ask for him or Marc.

    Perhaps inquire as to if you can hire them to simply review your paperwork. This might be less expensive than you think, and might put your mind at ease.

  41. Jillayne, re: 50 I review notes for consumers all the time, what’s going to be tricky for an “out sider” is factoring all that was involved with the transaction. There is so much that goes into pricing it’s amazing. I’m not sure if I’ve written a post about here…I may do so… beyond credit score, there’s loan amounts, loan to value, occupancy, what the current pricing was… and how much the LO wants to be compensated.

    With that said, I’ve seen some amazing (not in a good way) pricing going on w/other LO’s at other companies…BUT the consumer listened to their gut feelings before closing or getting too deep into the transaction.

    Consumers should trust their guts more and get second opinions early on if they smell something fishy.

  42. Jillayne:

    I disagree with the disclosure of fees. I would love to work that way, but disclosure of fees does not guarantee the lowest rate for consumers. The vast majority of consumers aren’t mature enough either to work with a mortgage professional in that manner.

    Consumers don’t care what brokers/originators are making in SRP/YSP. They care about their rate which is ultimatley what they are paying.

    You have two guys bragging at a BBQ about their rates they locked on the same day. The first guy says I got a 5.75% 30 year fixed. The second guys says I got a 6.375% 30 year fixed, but I only paid my loan officer $1000 in YSP as guaranteed by his upfront mortgage broker agreement!!! Obviously, the first guy doesn’t know what the YSP was on the loan, but do you really think he cares?

  43. Pingback: Foreclosures, FHA, Commercial, & Countrywide | Seattle Bubble — News & discussion about real estate & the housing bubble in the Seattle area.

  44. Why doesn’t this state require potential home owners to take a class and a test saying that they understand how mortgages work? I had to take a class and test to get a drivers license saying that I understood how a car works. Understandably it’s only one piece of the puzzle but I’m tired of homeowners whining about getting put in to bad loans when they knew exactly what was going on 98% of the time.

  45. Tired of passing the buck, I’ve always thought that some of this should be taught in high school…maybe part of a home ec class.

    And even with the class and drivers license, we still see lousy drivers!

  46. So back to the Governor… she chose to make this announcement at an Urban League luncheon hours after the merger was approved by CW shareholders. It gave her the opportunity to look tough. On Tuesday CW stock becomes BOA and they will still be servicing over 1 of 4 home loans in the US. CW has helped more people than any mortgage company in the world get into homes. It’s really too bad that the fingers are pointing at them now.

    This political snipit is affecting a lot of good people at Countrywide. A LOT of home owner’s, Realtors and mortgage brokers have benefited from CW’s services. Everyone wanted a piece of the pie. Now that homes are not appreciating at 10% per year we are paying the piper and it’s easy to point fingers.

    FIND THE HUD I Settlement Statement from the original loan? A mortgage company does not earn number one market share by overcharging people. Pricing is very competitive out there.

    The “Legal Day 1” meger is almost complete. The “Customer Day 1” which is the branding changover is coming soon.

    By the way.. the loans that were audited came from CW wholesale (broker business) not CW retail.

  47. Trevor:

    How do you know that these are from wholesale, not retail?

    If wholesale, how could Countrywide be held responsible for the pricing actions of brokers?

    Knowing where the speech was delivered explains why she omitted seeking justice for non-minorities that may have been harmed.

    Politics is theater.

  48. Jillayne, more evidence that our recent mortgage legislation sucks:

    ” If a borrower selects an LO who works for a mortgage broker (in WA State as of 6/12/08) then that borrower CAN chose with confidence, an LO who owes the consumer fiduciary duties, which are much higher than an LO who works for a bank, credit union, or consumer loan lender.”

    correspondent lenders = consumer loan lender

  49. Hi Trevor,

    Since you work for Countrywide, can you kindly provide evidence that these were broker-originated deals?

    Thank you for stopping by RCG.

    I know a number of people who work for Countrywide and I feel for them right now.

  50. Charges have been made – but not yet proven in court. Governors and attorney generals can say whatever they want, but have yet to spend millions mounting a legal case and proving their accusations.

    The PDF document on the DFI website shows a wide variety of loan numbers for the control group. Countrywide issues their loan numbers sequentially. This means those loans were most likely locked on very different dates / months / years, different rates, maybe even different loan program guidelines. Hard to know if they are purchase or refi loans, if people bought down the rate (the APR indicates this is a major possibility).

    But most people see things in the media and assume the worst, just like the Duke Lacrosse case. This time, the only thing missing from the media’s breathless reporting (Greed! Race! Class! Politics!) was mention of exotic dancers.

  51. Hi InterestedObserver,

    Countrywide has 20 days to respond to DFI. Let’s hope there are no exotic dancer stories that hit the media between now and then. I couldn’t help myself and googled it. All I found was a story in the WaPo about a stripper turned mortgage broker turned foreclosure rescue scammer.

    WA State DFI investigators sees a pattern.

    How many different sets of loans would satisfy you to believe that there was an ongoing pattern?

    I am sure BOA will take a look at the amount in fines and make a business decision on how to proceed.

    If there is fire where there’s smoke, then BOA will quickly settle and move forward “while admitting no wrongdoing.”

    If there’s a good, solid, defense, then perhaps this story is far from over.

    Personally, I’d like to see the breakdown in the difference between third party broker originations and CWide retail originated loans.

  52. Well, I just had to dig a little further, because elements of this story just were not adding up for me.

    1. Does the state claim that CW targeted minority groups or not? Two credible sources disagree (#17).

    2. Are the 600 loans examined retail, or wholesale? Unverified at present, but I have some reason to believe they are both.

    3. Can CW be in violation of the law, even if they did NOT target minorities, or intentionally discriminate against them?

    It is the 3rd question that I address now.

    Here’s a link that explains lending discrimination law fairly clearly, from which I am drawing the “quotes”.


    Turns out you do NOT have to target, or intentionally discriminate against a “protected class” to be in violation of the law (So, shoot me for not knowing that before. I’m not a banker’s lawyer, just a guy trying to do what’s right, and help people with loans).

    All that is required is evidence that impartially applied policies have a negative effect on a protected class. A lender is in violation when there is:

    “Evidence of “disparate impact,” when a lender applies a practice uniformly to all applicants but the
    practice has a discriminatory effect on a prohibited basis and is not justified by business necessity.”

    So, you can do the right thing, treat everyone the same, and still be in violation of law, if there is an unintended discriminatory effect.

    Under the law, a lender cannot:

    “Vary the terms of credit offered, including the amount, interest rate, duration, or type of loan”

    for a protected class, unless it is in an attempt to remedy a disporportionality.

    So, even if a protected class runs to a bad loan like kids after the ice-cream truck, instead of a good loan (from the guy trying to sell boring vegetables, I suppose), the lender can be in trouble. And if the lender tries to deny a protected class the opportunity to have that same ice-cream loan, they could be in trouble.

    About now, I am thinking there are a lot of opportunities for lawyers. And did anyone realize that this might be a problem when they dreamed up the Option Arm?

    ECOA and HMDA were originally created because lenders refused to lend to minorities. Thankfully, that is not the case today.

    So lenders fell all over themselves for the opportunity to lend to minorities (once it became profitable to do so), along with anyone else with equity and a pulse, or a desire for home ownership!

    Ultimately, I think this case will be about the $5M in back fees owed, and the opportunity to gain some political leverage (do you think there would have been much of a story, without the targeting minorities and predatory lending charge?).

    I think CW can beat the $1M for the discrimination charge with either the business necessity clause, or the inability of the state to make the loan data comprehensible to a judge or jury.

    Or, like Jillayne says, BOA pays up, and says “it’s all behind us now”, so they can avoid being the target of the next investigation.

    Because, if CW is guilty, from the “disparate impact” of impartially applied policies, and if the act holds that a lender is responsible for loans that it did not price (wholesale), then it is likely that ALL of the banks are guilty as well, if the state chooses to investigate them.

    Look out WAMU!

    I don’t think this version of events (if true) will make it to the mainstream media. It is easier to sell the short story, that of the big, bad, evil California lender, who has been righteously punished, and the belief that we are all safer now, due to the diligent actions of our government.

    I wish…

  53. Responding to Roger’s questions:

    “1. Does the state claim that CW targeted minority groups or not?”

    On page 2 of DFI’s Statement of Charges, DFI uses the word “target” repeatedly. We would have to get the answer from DFI. I believe it’s possible that the word “target” has a different meaning to DFI as a way to distinguish minority borrowers from the borrowers in their control group.

    “2. Are the 600 loans examined retail, or wholesale? Unverified at present, but I have some reason to believe they are both.”

    I have sent two emails to DFI and have not yet received a response.

    “3. Can CW be in violation of the law, even if they did NOT target minorities, or intentionally discriminate against them?”

    Well, yes. It doesn’t matter what our intentions are, however good they may be. What matters is the effect our actions have on our clients. The same could be said for our Fair Lending laws.

    This event does not necessarily mean “lookout WaMu” as much as it means “lookout all mortgage lenders licensed under DFI”

    All lenders are required to follow federal law no matter how they’re licensed.

    Further, we must not forget that there are OTHER charges against C-wide, which include under reporting on their annual assessments, failure to disclosed as required by state and federal law, improperly completing their HMDA data, and failure to notify the state of pending legal actions in other states.

    ALSO, the Statement of Charges, on page 9, indicates DFI is still conducting their investigation.

  54. “Jillayne, do you know if the 20 days CW has is from the date the document is dated (June 23) and if it’s biz days or calendar days?”

    I do not know. My guess is that C-wide will request a hearing to defend themselves.

  55. I was wondering too. No word at DFI website about the CW investigation.

    Check out this other big investigation, with a proposed $500,000 fine against American General Financial Services, who is charged with exceeding the statutory interest limit, with rates in excess of 25%, amongst other crimes.


    But wait, it gets even BETTER!


    There’s a company that used the name American General Financial Services that advertised bogus loans in local papers, used the legit AGFS office address but was not them!!

    Finally, not a drop of this is in the news.

    Are they just tired of it?

    Wow, just when you think it cannot get any weirder…

  56. Counrtry Wide Morgage Has stolen my escrow account money and has placed me under there insurence for my home.When I asked them for the number it was not correct.There insurence went up on me within the last year by almost a 1,000 dollars but there insurnce company does not excest.No contact no record of the lenders placed coverge.Please help with information.I can’t affored what there doing to me.My home is where the heart lives.Thank you

  57. Hi Nicole,

    I’m sorry to hear of your troubles with Countrywide. I seriously recommend that you contact an attorney with experience in consumer protection laws, who is licensed to do business in your state.

    I also recommend contacting a HUD-approved Housing Counseling agency. Their counselors are trained on loss mitigation tactics including how to spot potential RESPA violations. RESPA is a federal law that governs the practice of mortgage lending as well as a law that governs loan SERVICING practices, which is what you’re describing.

    Housing Counseling agencies are generally free or very, very low cost to the consumer. Get started by going to HUD.gov and about halfway down the page, under “at your service” look for the link titled “talk to a housing counselor”

    Then, look for agencies that offer DEFAULT counseling, in a city near you.

    For legal help, google your local state bar association and find the links that will help you determine if you may qualify for free legal aid.

    Best regards to you during this difficult time.

  58. Jillayne, I was just reading this in today’s paper:

    “In the most publicized action, Gov. Chris Gregoire announced charges last month against Countrywide Loans. The state accused the company of discriminating against minority borrowers on the same day California and Illinois sued Countrywide, accusing it of deceiving consumers into taking on risky loans.

    Countrywide did not comment on Washington’s investigation, but a spokesman said last month: “We continue to be duly authorized to conduct business in Washington and are actively serving home buyers and existing customers there. We do not expect this to change in the foreseeable future.”

    How can they still be operating as Countrywide in WA State?

  59. PI news story link:

    Quote from the news story:

    a spokesman said last MONTH: “We continue to be duly authorized to conduct business in Washington and are actively serving home buyers and existing customers there. We do not expect this to change in the foreseeable future.”

    emphasis mine.

    When DFI conducts an investigation, the first public records step is to issue a “statement of charges” which outlines DFI’s findings. The company is still able to conduct business….unless DFI issues an immediate cease and desist order, which they do when they find a company or individual is bringing grave harm to consumers. C-wide was not issued a cease and desist. DFI’s investigation is still ongoing.

    Our next public records doc on this case will be DFI’s statement of charges.

    If they’re still operating as C-wide today, I suppose Bank of Am could operate them as a wholly owned subsidiary….BOA has said they intend to dump the C-wide name sooner rather than later.

  60. Roger,

    Askimet Spam Filter auto captures hundreds upon hundreds of link spam all the time. It has a hard time determining spam comments with links from real comments with links. If you post a comment with a link and it doesn’t show, just email one of us. I happened to notice this comment and will see if I can dive into the spam filter and fish you out. Most often, comments with links are spam.

  61. Hmmm…not there. Is comment #80 with the link the one you are looking for, Roger?

    Here’s what was in Askimet: “Akismet has caught 427,435 spam for you since you first installed it. You have no spam currently in the queue. Must be your lucky day. :)”

    Unfortunately, while catching 427,435 nasty spam thingies…it captures one of us once in a while. Still, we are very happy that we don’t have to manually delete those 427,435 bad ones.

  62. Hey, I see the state settled up with Countrywide.


    The original fine included over $5M in underpaid annual assessments/taxes/fees to the State. Poof, gone. nada. Not one penny to the state in the consent order…CW/BOA must have better lawyers than WA state…

    The total fine ended up being $650K, all in restitution to borrowers in that were in protected classes (minorities) who received less favorable terms than non protected classes. The restitution ranged from $26K to $997, and goes to a lucky 123 borrowers.

    Must be like winning the lottery!

    File this in the “where are they now category”

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