Tag Archives: subprime

Uber pushes drivers into shady subprime auto loans

Geovanie Rosario signed the lease because it was easy. Tower Auto Mall came recommended by Uber, as one of four dealers the ride-hailing company partnered with in New York City to offer “flexible and affordable” rentals and lease-to-own contracts to drivers. Rosario went to see Tower one morning in May 2016 and started driving a black Lincoln MKS, New York City’s standard car-service vehicle, a week later. His contract included a $3,000 service fee and weekly payments of $495 for 159 weeks, or just over three years. Tower would take the payments directly out of his Uber earnings every Monday.

Rosario had quit his position as an assistant manager at Rent-A-Center, a job with benefits and a 401(k), to drive for Uber in March 2015. Rent-A-Center paid $12.25 an hour, and, based on Uber’s ads, he figured he could double that by becoming a driver. He had tried a couple of car rental options and, by the time he went to Tower, felt confident he could make enough to come out ahead.
Read on.

Citigroup (C) to Sell Subprime Lending Unit in Canada

Citigroup Inc. (CFree Report) entered into an agreement to sell CitiFinancial, its subprime lending unit in Canada, to an investor group led by private investment firm, JC Flowers and Värde Partners.

This is part of Citigroup’s strategy to emphasize on growth in core businesses through restructuring, expense management and streamlining operations internationally.

The divestiture is subject to regulatory approvals and is anticipated to close in the first half of 2017. While the amount for the sale remained undisclosed, this transaction is not likely to affect Citi’s financials.

Read on.

Nine executives had been recommended for 2008 mortgage meltdown criminal probe by FCIC

Former Treasury Secretary and Citibank Chair Bob Rubin was cited by a special congressional panel as someone who should have been the subject of a criminal investigation for activities related to the 2008 subprime mortgage meltdown.

The Financial Crisis Inquiry Commission (FCIC) had told the Justice Department that it should open an investigation of Rubin, Treasury Secretary under President Bill Clinton, for alleged securities fraud perpetrated as a member of Citibank’s board.

Rubin was among nine executives recommended for a criminal probe by the FCIC that were cited in a letter sent Thursday from Sen. Elizabeth Warren (D-Mass.) to Justice Department Inspector General Michael Horowitz.

Warren asked the department auditor this week to look into why zero criminal inquiries were launched as a result of the FCIC recommendations, which were publicly disclosed for the first time earlier this year.

Read on.

Former Fannie Mae CEO reaches final $100,000 subprime mortgage settlement

The final chapter in the government-sponsored enterprise executive financial crisis saga is over, once again following the same pattern of the previous accounts.

Former Fannie Mae CEO Daniel Mudd announced in a filing on Monday that he reached a settlement with the U.S. Securities and Exchange Commission for $100,000 over his role in the run-up to the financial crisis as the head of one of the mortgage funding giants, an article in Reuters by Patrick Rucker and Nate Raymond stated.

According to the article, Mudd was the last of six executives at mortgage funding giants Fannie Mae and Freddie Mac sued by the SEC in 2011 to reach a settlement.

From the article:

Like Mudd, the other five defendants reached relatively small settlements, none exceeding $250,000, despite facing SEC suits in what were among its biggest cases to arise from the financial crisis and mortgage meltdown.

Under the settlement, the court papers said Mudd would contribute or cause to contribute $100,000 to an account with the U.S. Treasury Department. The settlement leaves open who will pay the amount.

The article noted that Mudd did not admit to wrongdoing in settling.

Read on.

Former Subprime Lender NovaStar Files for Bankruptcy

Bizjournals:

The subprime lending roots of Kansas City-based Novation Cos. Inc. (OTC: NOVC) finally have caught up to the company, playing a role in its recent decision to file for Chapter 11 bankruptcy protection.

Novation is the successor company to NovaStar Financial Inc., a major subprime lender during the housing bubble that at one time originated more than $11 billion in mortgage loans a year.

Deutsche Bank : must face U.S. lawsuit over subprime disclosures

4Traders:

A U.S. judge on Monday said Deutsche Bank AG must face part of a lawsuit claiming it defrauded investors who bought $5.4 billion of preferred securities by concealing its exposure to the fast-deteriorating subprime mortgage market.

U.S. District Judge Deborah Batts in Manhattan said the plaintiffs may pursue claims with respect to offerings in November 2007 and February 2008, but not with respect to offerings in May 2007, July 2007 and May 2008.

Freddie Mac must face revived lawsuit over risk disclosures

4Traders:

A federal appeals court on Wednesday revived a lawsuit accusing Freddie Mac and several former top officials of defrauding shareholders by concealing its subprime mortgage exposure and its inadequate risk management prior to the 2008 financial crisis.

The 6th U.S. Circuit Court of Appeals said a lower court judge erred in concluding that the Ohio Public Employees Retirement System did not sufficiently allege that its losses were caused by Freddie Mac’s disclosure shortfalls.

Breaking news: Countrywide’s Mozilo reportedly off the hook for all those subprime mortgages

Oh, wow! Crime does pay! A big slap in the face to Countrywide whistleblower, Michael Winston. Unbelievable!!!

One of most notorious people at the center of the housing crisis is reportedly off the hook for any supposed malfeasance, as Bloomberg is reporting that the Department of Justice is abandoning its attempt to sue Angelo Mozilo, the founder ofCountrywide, for his company’s lending practices in the run-up to the housing crisis.

Countrywide originated more mortgages in this country from 2004 to 2007 than any other lender. During that time, Countrywide closed so many subprime mortgages it remained a top-5 producer for that home loan product. The same goes for other loans, such as Alt-A.

The DOJ first began seeking a civil suit against Mozilo two years ago, after the statute of limitations expired for any criminal charges that could have been filed against Countrywide’s founder.

Mozilo long held that Countrywide “didn’t do anything wrong” when it came to the lender’s underwriting and origination practices.

In 2014, Mozilo told Bloomberg that he felt his company was not to blame for the subprime mortgage crisis.

“You’ll have to ask those people, ‘What do you have against Mozilo, what did he do?’” Mozilo said in 2014.

“Countrywide didn’t change. I didn’t change. The world changed,” he continued. “No, no, no, we didn’t do anything wrong,” he said, adding that a real estate collapse was the root of the crisis. “Countrywide or Mozilo didn’t cause any of that.”

And now, it appears that the DOJ is unable or unwilling to proceed with its case against Mozilo.

From Bloomberg:

U.S. prosecutors have abandoned their case against Angelo Mozilo, a pioneer of the risky subprime mortgages that fueled the financial crisis, after a two-year quest to bring a civil suit against him.

The Justice Department has decided not to sue Mozilo, the co-founder of Countrywide Financial Corp., according to people familiar with the matter. That effectively ends nearly a decade of U.S. scrutiny of a man who became a face of risky lending practices and later an emblem of the government’s mixed success in holding individuals accountable.

Read on.

Bonds backed by car loans made to subprime borrowers are showing cracks

This is the next US problem..

The market for bonds backed by car loans made to borrowers with low credit ratings is beginning to show some cracks.

Delinquencies on U.S. subprime auto asset-backed securities (ABS) climbed to a 20-year high in February, exceeding the levels seen in 2009 following the financial crisis, Fitch Ratings warned on Monday.

The number of subprime delinquencies of 60 days or more hit 5.16% in February, said Fitch, its highest level since October of 1996, when it hit 5.96%. The February number is 11.6% above February of 2015, and up 3.63% from January.

Read on.

TRUMP MORTGAGE FLOP TIED TO CREDENTIALS FLAP

This a 2007 article on NY Post:

 

As the mortgage mess widens, Donald Trump has pulled the plug on Trump Mortgage less than two years after its launch.

Plagued by bad timing and the disclosure that the firm’s chief executive, E.J. Ridings, had inflated his credentials, the outfit never came close to reaching its financial goals, according to a report today in Crain’s New York Business.

Instead of doing $3 billion in deals as promised, it barely reached the $1 billion level, the report said.

Trump played down his role in Trump Mortgage, saying it was just a licensing deal and he didn’t have an ownership stake.

Trump is, however, licensing his name to First Meridian Mortgage, a lender that is being renamed Trump Financial.

And here is Trump Financial press release in 2007:

THE TRUMP ORGANIZATION AND FIRST MERIDIAN MORTGAGE ANNOUNCE THE FORMATION OF TRUMP FINANCIAL NEW YORK, NY JUNE 27, 2007 – The Trump Organization is pleased to announce an exclusive strategic alliance with First Meridian Mortgage and the formation of a new entity to operate as Trump Financial. Trump Financial will offer its prospective clients an array of financial products and services while at the same time remaining focused on First Meridian’s expertise in the residential mortgage arena.

Since its founding in 1991, First Meridian has developed an excellent reputation for providing the highest quality service at the most competitive prices as well as introducing innovative loan products for individual borrowers and real estate developers. Over the years, First Meridian has experienced steady growth in its mortgage applications and closings, making it one of the fastest growing mortgage banking companies in the country. Led by its entrepreneurial Founder and CEO, David Brecher, First Meridian has established a foothold in prime real estate areas such as New York, South Florida, Connecticut, California, Washington D.C., Pennsylvania, New Jersey, Virginia and Massachusetts. First Meridian is a licensed mortgage banker in 12 states (NY, NJ, CT, FL, CA, PA, MA, DC, MD, IL, VA, and MN) and has established a strong name in the real estate financing industry for its outstanding service, professionalism and integrity.

Trump Financial will combine the strengths of The Trump Organization with First Meridian’s expertise in the residential mortgage sector to become a leader in the financial services industry. The success of Trump Financial will be achieved by a team of professionals who thoroughly adhere to standards set by Mr. Trump himself. It will offer its clients first-class service accessible to all, careful attention to detail, creative thinking, constant client interaction and feedback, an overall “white glove” business experience, and above all else, impeccable integrity.

“First Meridian is proud to be a part of The Trump Organization family and will strive to capitalize on this unique opportunity and ensure the success of this venture”, Brecher said. For more information about Trump Financial or about this press-release, please call (866) 796-7523 or email info@trumpfin.com.

And more fromThe Fiscal Times:

If you were to pick the worst possible time in American history to start a mortgage company, April 2006 would get a lot of consideration. That’s when The Donald held a press conference at Trump Tower for Trump Mortgage, right at the peak of the housing bubble. Just one month later, Ameriquest, one of the largest subprime lenders in the country, closed all its retail offices, an early warning of the collapse to come. 

But that April, Trump was characteristically upbeat, vowing that Trump Mortgage would become the nation’s top home lender. He told Maria Bartiromo, “I think it’s a great time to start a mortgage company,” adding, “who knows about financing better than I do?” 

Trump hired as chief executive of Trump Mortgage a man named E.J. Ridings, a friend of his son Donald Jr. Ridings boasted on the corporate website of being a “top executive at one of Wall Street’s most prestigious investment banks” with 15 years of financial industry experience. All of that turned out to be false; he was a registered stockbroker with Dean Witter Reynolds for a total of six days, and an entry-level loan originator at a boutique mortgage company for a little over a year. Ridings gamely ignored the embarrassing disclosures, telling Money magazine, “Trump Mortgage is going to be huge.” 

Six top executives left Trump Mortgage in the first six months. An initial sales goal of $3 billion in the first year was soon downgraded to under $1 billion. By August 2007,Trump Mortgage closed, one of hundreds of failed lenders in the wake of the housing crash. Unsurprisingly, Trump distanced himself from the implosion, saying he only licensed his name to it, and that “the mortgage business is not a business I particularly liked or wanted to be part of in a very big way.” 

Despite that coolness, Trump allowed his name to be licensed by First Meridian Mortgage for a second company, renamed Trump Financial. That too went out of business; the company reverted back to its original name. First Meridian wassubsequently accused of illegally fabricating mortgage assignments to foreclose on properties, and employing robo-signers to execute those faulty assignments. 

Trump was not done with the mortgage collapse, however. Twenty years earlier, hehelped save a woman’s farm from foreclosure. But a remarkable Los Angeles Timescolumn in December 2007 shows that Trump saw the latest iteration of foreclosure crisis not as a tragedy, but a business opportunity.