WMC underwrote some of the crappiest subprime loans

Posted by: Peter Coy on February 21, 2008

Tom Brown.jpg
You can learn a lot by looking under the hood of the conked-out subprime mortgage-backed security business. Some of the mortgages underlying those securities were pretty good and others were very, very bad. WMC of Burbank, Calif., which was acquired in 2004 by General Electric, underwrote some of the worst mortgages, according to an analysis last week by finance expert Tom Brown (pictured), head of BankStocks.com, over at Seeking Alpha. Wells Fargo wrote some of the best subprime loans. Proof? Securities that are chock-full of WMC mortgages are doing extremely badly, while ones rich in Wells Fargo mortgages are holding up much better. Brown’s point: You can’t generalize about mortgage-backed securities since they’re all different.

Reader Comments

a.eneedjobstoo

February 25, 2008 6:04 PM

WMC was backed by one of the largest companies in the world. GE would never allow it’s people to underwrite outside of their guidelines! Furthermore, WMC never did NegAm or Option Arm loans, unlike several LARGE Subprime lenders! As a matter of fact, these Large lenders I am talking about got removed from the rat race because the lied, cheated and were caught stealing from their investors!! They also were investigated by the feds and shut down, never giving folks like yourself time to see how s*tty their paper truly was. Now it doesn’t take an idiot to figure out that in the corp rat race poo rolls down hill, and who was left to pick it up, but companies that sold Subprime loans. Anyone that worked in the industry knows what brought the market down …let’s break it down for the finger pointing people out there!

1. Most of all loans that are not performing now are what? NegAm’s , Option Arms, and Stated Self employed borrowers…correct?

2. Who approved these programs to being with? The Government!

3. Who sold them? Alt-A lenders primarily and Mortgage Brokers!!

The same brokers that were at fault for putting a 65 year women in a Option Arm w/ a teaser rate of 1.5%...it is that same type of broker that told the bank that they are not allowed to age dicriminate against the borrower!!!

So as a recap…unless you were a one-stop-shop that had the ability to sell all programs or your investor approved the programs in which you were selling you could or could not sell these bad loans. WMC had not one investor willing to purchase a hybrid, NegAm, option arm or any other out of the box type loan that they were not used to having in our guidelines. Every Bank in the world that sells loans to the secondary market has to have some sort of approval to the loans that are on the books for purchase. Without that process there would be Millions sitting on their warehouse line…oh, wait, There WAS!! Hello, with guidelines changing so fast and mostly on a daily basis people were left with crap sitting there. It was only listed as crap because the guides changed so fast that the program was no longer around anymore. Whose fault is it? Everyone…but let’s not forget were to start, and the start line is at the top of the food chain folks! Where did the approval for these loans come from in the first place?? We all know the answer and no one is willing to take blame...hummm...I wonder why! How easy is it to go after to little guys, the folks that helped the under dogs get a damn home to being with.

Is the Real estate market sometimes risky? Absolutely! Every business is at some point in time…but again, WMC never had the fed up their ass, nor did they lie on their P&L’s and cheat their investors out of millions just so VP’s could make a quick buck! Were there some bad loans…I’m sure there were…but there were thousand others that were great loans! It was not just WMC or any other lender that raised the bar for programs, loan amounts, or guidelines…there has to be some fault placed on the Fed’s and secondary for setting standards far above what the general public could stand up to. WMC followed suit just like everyone else. However they were not saved out of it all, unlike the Nations largest lending institution that had to borrow money just to pay its people. If that wasn’t some major outside interference than I don’t know what is! If that company went down then the government would be forced to recognize a major national crisis!! WMC sold the same products as this company, so are you say they had the crappiest loans as well???

The folks you need to address is the Fed's for coming up with the programs, the brokers that sold them, the banks that underwrote them, and all the Alt-A guys that made the fast buck! Its those guys that are hiding everyday, changing their cell numbers.. the ones that put your mom in a crappy loan and now she might have to walk from it b/c the damn fed's wont step in to save her home!!

Bash them, not WMC!! Or better yet Bash GE...or are you affraid of a lawsuit?? Because it was GE guidelines that WMC had to underwrite. AND while your at it...look up WMC's track record on the performance of their paper prior to GE coming into play.

Learn your facts Jack before you bash a company...WMC hasnt really been WMC since 2004!!!!!!

bdk

February 25, 2008 6:35 PM

WOW you have no clue do you..... Why is it that "no it alls" like yourself never post about how all the companies crying on wall st about all the losses were the ones pushing for these loans to begin with.. god forbid you write about all the volume incentives those big banks were offering for the mortgage backed securitizations! Or the fact that they accepted the loans with the exceptions built into them, they could have simply said NO to this bucket and that bucket of loans but they didnt they bought them out of greed... and now it has comeback to bite them in the ass. Again they wanted the loans they audited the loans they could have turned them down and made the lenders like WMC, New Century etc buy them back.... Its spineless point the finger journalsists who write this crap like you that have now created a secondary problems... you have systematically demonized the entire mortgage industry, where good honest hard working folks can't even get a job outside the mortgage industry now. Ex mortgage professionals are labeled as people with no ethics, liars and frauds - Some are in fact guilty of this but it is beyond complex; from many it is clearly driven by greed, others would say they were doing their job and following orders. Part of this problem some say has been nailed down (to a degree) that it stems from commissions where many ex-mortgage professionals were on 100% commission. Here is the underlying problem with THIS business is this gimme more attitude and production goals that were forced on sales people and operations staff. Obviously as a loan officer(retail) or account executive(wholesale) you want to close deals b/c odds are you do you production goals to meet not to mention have mtg/rent, car, phone, elec, water, gas, and food to pay for. Same can b said for account manager, processors underwriters who had bonuses etc on the number of units they got through to funding. But companies got so forceful with a "do it or your outta here" attitude that its created a lot of the fraud etc that has been going on, this production goal forced people to do shady things b/c they needed to keep their job and so many companies are/were so callous towards their employees. Businesses outside of mortgage don't crucify their sales people as those in mortgage industry if you dont hit your numbers. Hell yes you will be watched, on probation etc etc but they don't threaten sales people as many mortgage companies did. That is the #1 difference one can see in comparing sales in mtg bus vs outside the industry. It is in top 3 catalysts why this business went to hell! This topic is beyond complex as some knew exactly what they were doing where others had things hidden from them and no clue. Either way ex-mortgage professionals are looked at as the cause of it all. Knowledge or not if they can't control their own business then companies outside of mortgage don't want it in theirs. Some hardest hit by this is all the underwriters as it was their job to mitigate the risk in a file, so the next logical employer they go to is insurance who thinks they wrote a bad loan so there is noway they are going to underwrite a $1000000 policy for someone. The greed came from the top of investment banks on Wall Street all the way down to the local loan officer/ mortgage broker. Wall Street investors/companies wanted more and more in sales volume bottom line as incentives were available when certain benchmarks were reached. It is seen day in and day out to support this theory as large corporations are taking huge charges to their bottom line now, and some are letting their CEO's go or encouraging them to go! Yet we never hear the stories of those who use to work in mortgage business who are victims aswell because that would ruin the "no-it-all's" theories.
You folks need to start telling both sides of the story and lets not forget the poor poor borrower, many are in fact innocent but when was the last time any of you "journalists" reported on how the borrowers themselves were scamming the banks? Uh oh god forbid right you wouldn't want to report on that would you? All of you on the outside write about the mortgage industry when you had no clue not realizing that some feeble minded folks read what you right as gospel which in turn your negativity gets taken out on honest people trying to find work. Stop telling your one sided story to make a buck tell both sides if not for the moral to tell the whole story then do it b/c 2 articles will make you more money, uh oh that wouldn't be greed in your mind would it... well now then your just as guilty as those in the mortgage business.........

EasyMoney

March 5, 2008 2:37 AM

When there's easy money, all the scam artist flock to it. Suckers fall over themselves eating it up. Feeding frenzy with mob mentality: Get out of my way! Aint nobody going to stop me from my ripping off the ignorant, stupid, and mentally challenge. The real estate bonanza of the 2001-06 will be known as the years when Wall Street's greedies met the back street's sleezies. And the sleezies won. Former used car salesmen became instant mortgage loan "counselors, reconciliators, and consultants." Door-to-door salesmen dropped their vacuum cleaners and magazine subscription binders, then hawked no-money down real estate sales financed with no-documentations and no brainers. When you can earn over $100,000 per years, your morality can slip a with a little help from your friendly appraisers who could "help you get a little higher" without the dope. Why run up against the law when you can do it "legit" within the system. Everybody is on the gravy train so let's go with the flow? The extent of the mortgage crises showns how bankrupt some American morality has sank. The "easy money" is now the quick-fix for a nation of desperate people. Dot-com bubble followed by real estate bubble within less than 10 years is testimony that the American people has lost their faith in the American hard work ethic, and a better tomorrow. The proliferation of gambling casinos, and state lotteries throughout the country further show how desperate we have become. The land of desperados have lost their faith in themselves, in their ability to work for a better future, to forge a better, stronger nation.

miss reporting of facts

September 23, 2008 10:51 AM

First off you do not know the facts or how subprime works. OBVIOUSLY! The feds do not regulate subprime lenders that are not FDIC insured. The feds did not have control or regulation over the established programs by non-FDIC insured subprime lenders. These programs stated self employed orwage earner interest only, 100% financing were created by investors appeatite for more high yield product. The creator and leader of this product was WMC was the first 100% cltv stated income self employed and wage earner program. The person who was the leader was none other than Amy Brandt. Same with low credit score 100% cltv programs for borrowers with 580 credit score, 1 of 8 of these loans were at risk for default. Plus it was interest only programs. With no down payment and only two mos piti reserve requirement. Even closing costs could be gifted or seller contribution of 6% of all costs except prepaid mtg interest.

truthful

September 23, 2008 10:58 AM

Also GE bought a company that it's CEO-Brandt requested in fluck of production so GE would buy WMC. She new her Top Account Reps (known as BDR) were conducting massive fraud. The majority of reps there with ethics did not buy into this game. Many Underwriters, Credit Officers objected and tried to stop the material misrepresentation. The problem was technology today makes it easy to create income documentation, verification of deposits(verified assets). Tax software, quickbooks, etc. have enabled fraudulent borrowers and brokers to conduct material misrepresentation. When audits were able to be conducted it was traced back to the borrower creating the fraud. The borrower was always the victim, they also perputrated fraud by creating income, assets, leverage the assets from family members, credit cards. The over appreciating market created mayheym. There is now a correction going on for homes that over appreciated due to shortage of demand.

Brokerwhoknowsbetter

May 12, 2009 1:23 AM

The comment from "truthful" said it all....WMC was taking in BAD loans all for the love of money....Whats so interesting is now even some of the top 10 BDRS are selling their big fat mansions (back East)...Karma has a wonderful way of kicking you right in the groin when u least expect it! Boo-Ya!

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About

BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.

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