More Mortgage Lying

When lying is not properly addressed and punished it will merely perpetuate.

We witness that dynamic in almost all corners of our economic and political landscape. In the world of finance, regrettably no market segment seems to have fostered more lying than the mortgage business. It continues. Let’s navigate.

A strong and vibrant mortgage market is vitally necessary in order for our country to regain its economic health. Regrettably the mortgage business has a bad reputation given the preponderance of lying. Far too many people took out oversized mortgages based upon inflated incomes. Those ‘liar loans’ have defaulted at exceptionally high rates.

Let’s turn the page as many mortgages are attempting to be modified. What do we learn. People are once again lying about their incomes, this time understating income, in an attempt to have their mortgages modified to a lower level.

Thanks to 12th Street Capital for sharing this release from Making Home Affordable,

Permanent HAMP Waiver for Elimination of the 25% Trial Period Restart Rule #20091203 Supplemental Directive 09-01 (issued April 6, 2009) required borrowers to be reevaluated for a HAMP trial period if their verified income (as evidenced by the borrower’s documentation) exceeded the initial income information used by the servicer to place the borrower in the trial period by more than 25%. The borrower would be reevaluated based on the program eligibility and underwriting requirements and, if eligible, would have to restart the trial period.

With the issuance of this waiver, borrowers are no longer required to restart the trial period. The trial period payments would not be adjusted, but the permanent modification terms would be based on the borrower’s higher verified income.

What does this mean? In plain English, if a person intentionally understates his income level (that is, lies about his income), he no longer needs to restart the mortgage modification process but merely continue from that point based upon verified income level.

In essence this waiver will promote people to lie about their income levels. Why? There is no downside to lying. People are not thrown out of the process nor even sent to the back of the line. They stay in line, adjust their income levels if caught and continue along.

Why is Uncle Sam promoting this practice? The numbers of successful and permanent mortgage modifications are so abysmal that Uncle Sam will almost do anything to expedite the process and inflate the numbers.

What should happen if people lie? Get the hell out of here and don’t let the door hit you in the back on the way out.

What is happening? Nothing. With this waiver, people actually have an incentive to lie. I repeat, when lying is not properly addressed and punished it will merely perpetuate.

We have become a nation of liars.

That is no foundation for long term economic health and prosperity.

About Larry Doyle 522 Articles

Larry Doyle embarked on his Wall Street career in 1983 as a mortgage-backed securities trader for The First Boston Corporation. He was involved in the growth and development of the secondary mortgage market from its near infancy.

After close to 7 years at First Boston, Larry joined Bear Stearns in early 1990 as a mortgage trader. In 1993, Larry was named a Senior Managing Director at the firm. He left Bear to join Union Bank of Switzerland in late 1996 as Head of Mortgage Trading.

In 1998, after 15 years of trading and precipitated by Swiss Bank’s takeover of UBS, Larry moved from trading to sales as a senior salesperson at Bank of America. His move into sales led him to the role as National Sales Manager for Securitized Products at JP Morgan Chase in 2000. He was integrally involved in developing the department, hiring 40 salespeople, and generating $300 million in sales revenue. He left JP Morgan in 2006.

Throughout his career, Larry eagerly engaged clients and colleagues. He has mentored dozens of junior colleagues, recruited at a number of colleges and universities, and interviewed hundreds. He has also had extensive public speaking experience. Additionally, Larry served as Chair of the Mortgage Trading Committee for the Public Securities Association (PSA) in the mid-90s.

Larry graduated Cum Laude, Phi Beta Kappa in 1983 from the College of the Holy Cross.

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2 Comments on More Mortgage Lying

  1. This author badly needs an effective editor. Not only because of the terrible prose, but because it apparently never occurred to him or her that incomes can legitimately change in three months.

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