Part IV - What Exactly Do We Have Here? An Appalling Impac, Chicago Title & IndyMac Lending Story
Originally posted April 24, 2008...
In the instance of the first lender WORLD S&L ($303K) we give credit where it is due…
Mr. A. Pauling, pulled a fast one with the permission letter from his daughter Dee, and LEGALLY took the loan as the TRUSTEE of the trust.
The second lender DOWNEY Savings ($520K) wasn't worried because the loan to value was under 80% at this point.
The third lender UN-SECURED FUNDING ($111K) gave A. Pauling a 2nd or bridge loan to tide him over, still under 80% LTV.
In these three instances, we have a 77 year old man taking out a 30 year loan with a FICO score of only 665;
In the instance of fourth lender, IMPAC Funding ($774K) add in:
A conspicuous and auspicious borrowing history over the preceding 20 months;
a loan being made for 90% LTV on the property value ($860K); AND
A 77 year old man taking out a INTEREST ONLY ARM OPTION or negative amortization loan.
The 1st Mortgage was $674K, with prepaid finance charges of 14K for a total of $688K. Here is Mr. A. Pauling's payment schedule over 30 years:
12 payments at 2212.88; 12 at 2378.85; 12 at 2557.26; 4 at 2749.05; then 319 at 5220.13.
Did IMPAC Funding realistically and reasonably expect this loan to be repaid by the borrower?
IN ALL of these instances except the first one: We have a lack due diligence or flat out negligence in loan origination, loan processing and underwriting.
We also have fraudulent or invalid title exchanges under the instruction of the lenders,
to facilitate the funding of the loans in the name of an individual who quite simply, DID NOT OWN THE RESIDENCE.
I have often spoken to the change in lending models that has contributed to the current real estate sub prime and debt market morass.
That change being, originate to SOLD versus the old school originate to HOLD, where the originators,
processors and underwriters exerted due diligence to mitigate the downstream servicing risks to the association which was going to hold the loan to term.
Originate to SOLD strives to generate loan fees and points, as long as it looks good on paper,
the actual quality of the property and borrowers ability to repay are inconsequential. Why?
The association will be packaging and selling the debt downstream, where it will again be repackaged
into MBS based derivative debt instruments and resold to bond holders.
It is obvious that IMPAC looked exclusively to the "market value" of the collateral, and virtually ignored the borrower's ability to repay the loan. Why?
There was a blank assignment of beneficial interest under deed of trust contained in the loan file, fully executed and notarized, but with NO transferee identified.
Clearly, IMPAC made this loan with the intention of selling it. And sell it they did, to INDYMAC BANK FSB in January 2006, or so they claimed.
If you think this story mercifully ends here, oh no, guess again. If you think you've heard it all, it gets even more unbelievable and heinous.
More to come tomorrow in Part V: Lawyers, Deeds & Money
Preface & Intro
Part I: The Hook
Part II: The Tale
Part III: The Sting
In the instance of the first lender WORLD S&L ($303K) we give credit where it is due…
Mr. A. Pauling, pulled a fast one with the permission letter from his daughter Dee, and LEGALLY took the loan as the TRUSTEE of the trust.
The second lender DOWNEY Savings ($520K) wasn't worried because the loan to value was under 80% at this point.
The third lender UN-SECURED FUNDING ($111K) gave A. Pauling a 2nd or bridge loan to tide him over, still under 80% LTV.
In these three instances, we have a 77 year old man taking out a 30 year loan with a FICO score of only 665;
In the instance of fourth lender, IMPAC Funding ($774K) add in:
A conspicuous and auspicious borrowing history over the preceding 20 months;
a loan being made for 90% LTV on the property value ($860K); AND
A 77 year old man taking out a INTEREST ONLY ARM OPTION or negative amortization loan.
The 1st Mortgage was $674K, with prepaid finance charges of 14K for a total of $688K. Here is Mr. A. Pauling's payment schedule over 30 years:
12 payments at 2212.88; 12 at 2378.85; 12 at 2557.26; 4 at 2749.05; then 319 at 5220.13.
Did IMPAC Funding realistically and reasonably expect this loan to be repaid by the borrower?
IN ALL of these instances except the first one: We have a lack due diligence or flat out negligence in loan origination, loan processing and underwriting.
We also have fraudulent or invalid title exchanges under the instruction of the lenders,
to facilitate the funding of the loans in the name of an individual who quite simply, DID NOT OWN THE RESIDENCE.
I have often spoken to the change in lending models that has contributed to the current real estate sub prime and debt market morass.
That change being, originate to SOLD versus the old school originate to HOLD, where the originators,
processors and underwriters exerted due diligence to mitigate the downstream servicing risks to the association which was going to hold the loan to term.
Originate to SOLD strives to generate loan fees and points, as long as it looks good on paper,
the actual quality of the property and borrowers ability to repay are inconsequential. Why?
The association will be packaging and selling the debt downstream, where it will again be repackaged
into MBS based derivative debt instruments and resold to bond holders.
It is obvious that IMPAC looked exclusively to the "market value" of the collateral, and virtually ignored the borrower's ability to repay the loan. Why?
There was a blank assignment of beneficial interest under deed of trust contained in the loan file, fully executed and notarized, but with NO transferee identified.
Clearly, IMPAC made this loan with the intention of selling it. And sell it they did, to INDYMAC BANK FSB in January 2006, or so they claimed.
If you think this story mercifully ends here, oh no, guess again. If you think you've heard it all, it gets even more unbelievable and heinous.
More to come tomorrow in Part V: Lawyers, Deeds & Money
Preface & Intro
Part I: The Hook
Part II: The Tale
Part III: The Sting
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