Lenny and the Shark
Posted on March 6, 2007 - Filed Under Rant |
An hourly Target employee wages equal to $84,000? Totally believable.
Read this.
In the aforementioned article, the borrow of a $126,000 loan, on a $696,000 house had a monthly payment of $4482. Where the story falls apart is the borrower is a Target Employee. Unless they are the president of the company, I doubt highly if the cashiers are making $84,000 per year.
Now how could this possibly happen?
I’m glad you asked.
When applying for a loan, there are two avenues the loan officer can pursue. One is what is referred to as a "Full Doc" loan. Simply put, this is where the borrow provides proof of employment, paychecks, bank statements, etc. for the past two years. In addition to having their credit run, the entire financial picture of the borrower is exposed to the lender, thereby making a decision of how much money to lend a sound decision.
The other avenue is what is refered to as "Stated Income". In this case, the borrower simply states what their income is without providing proof of it. The loan officer must determine if the data is accurate or not. If at any time the loan feels suspicious, the lender can demand proof of income from the borrower.
Understanding the difference, it’s safe to assume this is probably a "stated income" loan.
But somehow, I cannot envision the phone conversation in my head.
Loan Officer: Thank you for calling Shark investments. My name is Shark. How may I help you?
Employee: Yes my name is Employee. I’d like a subprime loan and a mortgage to buy a house.
Shark: Alright Employee, where do you work?
Employee: Target.
Shark: And how much do you make?
Employee: $84,000
Shark: Excellent! We can hook you up!
No, that doesn’t feel right to me.
To assume the employee was the mastermind behind this entire process defies all reasoning. If anything, the shark of a loan officer lead the charge and the employee followed right along. After all, the employee is going to get a check for $126,000. I’m sure he’d bark like a dog and wear a diaper if the Shark asked him too.
I can see the conversation going like this:
Shark: OK Sucker so you work at Target. How much did you make per your last paychecks last month?
Employee: $1600.
Shark: Hmmm . . . . we can’t get you a loan with that income. Let’s see. We’ll if we go stated income, we can get the money.
Employee: OK.
In escrow, the paperwork the Employee signs clearly states the total amount due every month. They cannot claim ignorance of this fact so they are responsible for their mistake.
But the real blame needs to fall upon the Loan Officer. The idea of "Stated Income" is not to provide carte blanche power to loan officers to give money to those who simply can’t afford it. It is a tool, just like any other, that is to be used responsibly. For those that abuse that responsibility, there is a price to be paid.
There are articles about poor "Aunt Edna" who lost her home because of some Shark. While Aunt Edna’s poor living conditions are described in great detail, the fate of the Shark remains unknown.
What happened to the Shark who funded this loan? Did he get fired? Did his manager reprimand him? Was he sent to bed early with no supper?
Odds are none of that happened. The lender takes possession of the property, sells it off to recover their costs, and moves onto the next victim.
Poor Aunt Edna is left with screwed up credit, a shopping cart, and holes in her socks.
This is Fraud. Plain and simple. And the loan officer who knowingly commits it needs to be prosecuted: fines and jail time.
If this happened in the stock market, the FCC would be all over the people involved. I watch Law and Order. I know what happens.
Lenny: Shark, please stand up. I have a warrant for your arrest.
Shark: But I didn’t do it! That b*tch Edna lied to me!
Lenny: Yeah that’s what I said to my 3 ex-wives.
The same needs to be applied here.
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2 Responses to “Lenny and the Shark”
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i read that too.
i think a lot of people are going to jail for mortgage fraud!
i know subprime mortgage brokers who got 6 points to do the loan. That means on a $300k loan they made 18k!!
do you think they care if the borrower can make the payments or not!! NO. they only care about how much money they made at the end of the month.