ANATOMY OF A MORTGAGE SCAM-- THE GOP DREAM OF UNFETTERED, UNREGULATED CAPITALISM

If we allow ourselves to be manipulated and cheated by cynical political hacks like McCain and Clinton, a sharp businessman might reason, why couldn't he get in on the action too? The Enron boys sure did and, under the protection of Bush and Cheney, they stole billions from American taxpayers and rate-payers. But they're part of a long and disreputable tradition that has businessman paying off politicians who allow they to plunder the citizens. Republicans call it a free market and citizens rarely hold anyone accountable anyone. If they did would McCain have even the meager support he does after he was caught red-handed taking bribes from banker Charles Keating who then proceeded-- with McCain's active assistance-- to rip his bank's customers off for hundreds of millions of dollars?

Today's Wall Street Journal asks its readers to stop thinking about Rev Wright for a moment or two and consider the case of the nation's biggest mortgage brokerage, Countrywide Financial Corp., who CEO received $100 million last year-- while the company lost $893... in the first quarter.

In an hour I'm having breakfast with a former manager of a mortgage brokerage office in Colorado. He's going to explain the internals of how his company systematically ripped off its customers and helped to wreck the housing and real estate industries while enriching top executives-- and throwing the country into recession. This is the Republican vision of unfettered capitalism. I hope to write more about this in the coming week. For now, let me commend you to today's report in that commie rag, the Journal.

A federal probe of Countrywide, the nation's largest mortgage lender, is turning up evidence that sales executives at the company deliberately overlooked inflated income figures for many borrowers, people with knowledge of the investigation say.

Some of the problems are surfacing in a mortgage program called "Fast and Easy," in which borrowers were asked to provide little or no documentation of their finances, according to these people and to former Countrywide employees. Both Countrywide and Fannie Mae, the government-sponsored company that bought many of the loans, classify the loans as "prime," meaning low-risk.

Fast and Easy borrowers aren't required to produce pay stubs or tax forms to substantiate their claimed earnings. In many cases, Countrywide didn't even require loan officers to verify employment,
according to an October 2006 presentation by Countrywide's consumer-lending division. That left the program vulnerable to abuse by Countrywide loan officers and outside mortgage brokers seeking loans for customers who might have been turned away if their finances had been more closely scrutinized, according to three current and former Countrywide senior executives and to several mortgage brokers who arranged loans through the program.

The quarterly financial results, which included $3.05 billion of credit-related charges, did not provide details about the performance of the company's "no-doc" loans, including the Fast and Easy ones.
Late payments increased across the board: About 36% of "subprime" loans to people with weak credit records were at least 30 days overdue, up from 20% a year before. For all loans serviced by
Countrywide, a category mostly made up of prime loans, the delinquency rate was 9.3%, nearly double the year-earlier 4.9%.

In early January, as fears mounted that declining home values and rising defaults had left the company close to collapse, Countrywide agreed to be taken over by Bank of America Corp. in a stock swap valued at about $4 billion.

...In recent years, about one-third of all Countrywide prime mortgages eligible for sale to Fannie Mae were Fast and Easy.

During a conference call with investors last July, Countrywide acknowledged that Fast and Easy loans were riskier than fully documented prime loans. A chart provided to investors showed that a borrower who wasn't required to document income would be at least 50% more likely to fall behind on payments than a similar borrower who did provide documentation.

The Federal Bureau of Investigation is looking into a wide variety of Countrywide mortgages that didn't require full documentation, not just the Fast and Easy loans. People involved in the inquiry say the FBI has concluded that extensive fraud occurred on the loans, and they are looking into whether the company violated securities law by failing to disclose that to investors.

Perhaps the FBI should save themselves the trouble and go ask John McCain, who claims he doesn't know anything about economics but certainly knows more about corruption than the average politician. McCain can explain to the FBI that the cause of the mortgage crisis is irresponsible homeowners who were greedy and morally deficient and who need to fix the mess by getting second jobs and stop taking summer vacations.