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Tuesday, December 18, 2007

"I never made a loan that Wall Street wouldn't buy"

Items of interest:

Fast times at California boiler room lender

Daniel Sadek carries actress Nadia Bjorlin on the red carpet at premier of movie Redline, in LA on April 12, 2007Bob Ivry / Bloomberg:
`Deal With Devil' Funded Carrera Crash Before Subprime Shakeout -- One week in 2002, Daniel Sadek was $6,000 short of covering the payroll for his new subprime mortgage company, Quick Loan Funding Corp. So he flew to Las Vegas and put a $5,000 chip on the blackjack table.

``I could have borrowed the money, I suppose,'' Sadek says.

That wouldn't have been his style. With his shoulder-length hair and beard, torn jeans and T-shirts with slogans such as ``Where is God?'' Sadek looked more like a guitarist for Guns N' Roses than a mortgage banker.

Sadek says he was dealt a jack, then an ace. Blackjack. He would make payroll. Quick Loan Funding, based in Costa Mesa, California, would survive and, for a while, prosper as one of 1,300 mortgage lenders in the state vying to satisfy Wall Street's thirst for subprime debt.

As home prices rose and hunger for high-yield investments grew, Sadek found his niche pushing mortgages to borrowers with poor credit. Such subprime home loans grew to $600 billion, or 21 percent, of all U.S. mortages last year from $160 billion, or 7 percent, in 2001, according to Inside Mortgage Finance, an industry newsletter. [...]

``I never made a loan that Wall Street wouldn't buy,'' Sadek says. [...]
San Francisco Chronicle:
Guilty plea in subprime mortgage scam -- An Alameda County man pleaded guilty Monday to lying to a federal grand jury that is investigating subprime mortgage fraud in San Joaquin County, prosecutors said.

John Ngo, 27, of Dublin, a former senior loan coordinator for Long Beach Mortgage Co., admitted receiving payments from the company's sales representatives to get loan applications approved despite knowing that many of the applications were fraudulent, said the office of U.S. Attorney McGregor Scott in Sacramento. [...]
The Maestro at work, sweeping subprime mortgage dirt under the carpet.

Greenspan did not want to investigage deceptive lendingNY Times:
Fed Shrugged as Subprime Crisis Spread -- Until the boom in subprime mortgages turned into a national nightmare this summer, the few people who tried to warn federal banking officials might as well have been talking to themselves.

Edward M. Gramlich, a Federal Reserve governor who died in September, warned nearly seven years ago that a fast-growing new breed of lenders was luring many people into risky mortgages they could not afford.

But when Mr. Gramlich privately urged Fed examiners to investigate mortgage lenders affiliated with national banks, he was rebuffed by Alan Greenspan, the Fed chairman. [...]

“Hindsight is always 20-20, but it’s clear the Fed should have acted earlier,” said Ms. Bair, who became chairman of the Federal Deposit Insurance Corporation in 2006. “Financial innovation is great, but you have to have some basic rules. One of the most basic rules is that a borrower should have the ability to repay.” [...]
Bill Fleckenstein / MSN Money:
Another Fed gift to Wall Street -- The bulls thought last week's quarter-point interest-rate cut wasn't enough. So the central bank found another way to lift the spirits of our bailout nation.

Hours before the Federal Reserve announced its liquidity plan Wednesday, I wrote in my daily column on my Web site: "I suppose now the bulls will start chanting 'inter-meeting rate cut' or some other battle cry."

Little did I know how swiftly and dramatically their prayers would be answered. [...]

The Fed tends its flock

Then, shortly before the market's opening, the Fed announced its new term-auction-facility plan, whereby banks can borrow (pledging collateral to be determined) and receive funds at the prevailing rate that day. Thus, those who believe that markets should go up 1% or more a day -- but that the risks should be borne by the government -- won another round. [...]
IowaHawk: Please Don't Destroy My American DreamPaul Kedrosky / Infectious Greed:
The Real Subprime Backstory -- I really don't know how best to summarize IowaHawk's you-are-there white-trash treatise on the origins of the subprime crisis other than to say, read it. If you crossed Hunter Thompson and Michael Lewis, you might get something this angry and bizarre. [...]
IowaHawk: one afternoon while parked outside QuikTrip, Kyle, Chuck and I heard an advertisement on Q-103 for no-money-down, interest-only discount home loans at First Coralville Mortgage. Best yet, the ad promised a free First Coralville Igloo mini-kooler for all applicants regardless of approval! I decided to call for an appointment on the QT pay phone, before Ramesh chased us out.

The whole home buying process can be confusing and intimidating, especially for first time buyers. Luckily, First Coralville mortgage broker Linda Mustaine was there to help guide me through all the steps. Linda explained that the first step to home ownership was getting pre-qualified for a loan. I was surprised to learn that my lack of a full-time "paying job" was no barrier, thanks to FCM's exciting RapidNow Subprime HomeCash program. [...]

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