From Realtor Magazine Online, Daily Real Estate News March 18, 2008
Freelance loan checkers hired by brokers, lenders, and investment banks to examine the paperwork on home loans being sold as securities say they raised red flags and were ignored.
Executives at the two main firms that hired the freelancers – Shelton, Conn.-based Clayton Holdings Inc. and San Francisco-based Bohan Group – said the checkers were hired primarily to determine how much to pay for a pool of loans. The investors wanted only minimal testing of the quality of the loans, says Frank P. Filipps, CEO of Clayton. "The client really drives the process," he says.
New York Attorney General Andrew Cuomo, who is investigating some aspects of the mortgage debacle, has given Clayton immunity from prosecution in return for help in learning whether debt-rating firms and investors got enough information about the loans being sold.
A supervisor for Clayton, Ed Peek, who was interviewed by the Los Angeles Times, said he watched standards deteriorate. “When it started, you couldn’t get a subprime loan for over 80 percent of a property’s value. But the guidelines were loosened, and the investors would still buy," Peek said. "They were loosened up some more, and investors still buy. …Everyone knew this was a bubble that couldn't last. We all could see this coming."
Source: Los Angeles Times, E. Scott Reckard (03/17/08)
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