An Indymac Borrower Speaks

Posted by: Chris Palmeri on July 16, 2008

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.”

Reader Comments

Denton Ward - eRealtyInvestors

July 16, 2008 6:18 PM

Too many people were caught up in the hype of making HUGE commissions...I wish they could investigate loan officers who did these things to people.

I guess they won't be getting any referrals any time soon!

Dan

July 17, 2008 11:36 AM

Interesting, sounds like buyer's remorse to me. People couldn't buy houses fast enough at high prices, now they want to whine because the market dropped. Bottom line, the borrower knew he couldn't afford $3,800 a month house payments, yet signed his name anyway. I doubt Indymac was a party to the fraud, sounds like the mortgage broker or the borrower is at fault. Who has the most to gain by doctoring numbers up, the mortgage broker, the guy dying to buy the house or the bank that ultimately will get stuck with a depressed asset??? Hmmmm, I wonder.

RYAN

May 1, 2009 9:28 AM

your right, the banks are taking it in the shorts with these loans, making $300,000 to $400,000 in interest and fees over the life of one loan is just not enough money to stay going? or maybe it is!

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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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