I got a call from an Indymac borrower who asked that his name not be used. He and his wife bought a three bedroom townhouse in the Los Angeles suburb of Chatsworth for $525,000 in March 2006. He says that two weeks after closing on the home he got a letter from Indymac asking him to confirm info on the mortgage application. “Suddenly it had all these numbers we’d never seen before,” he says. They included income inflated by 30%.
He called his independent mortgage broker and was told it was just normal procedure; they do this so they can sell the loans. The broker provided him with a letter from Indymac asking the broker for the changes. By the time the bank had asked the borrower to confirm the new numbers, he says he’d already moved in. He signed the papers. “We unwittingly participated in this fraud out of fear,” he says.
Today the townhouse has dropped some 20% in value. With the economy slow, the independent software engineer is having troubled making the $3,800 a month house payments. He’s looking to renegotiate the loan. Yesterday he called an Indymac customer service hotline and was told the hold time would be seven hours.
“I was very frustrated reading in the papers that it was the borrowers that brought down Indymac,” he says. “There was definitively an effort on Indymac’s part to fraudulently complete my loan. I’d have been a lot happier if they had just denied it.”
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.