If you have not noticed lately, there are a lot of lawsuits happening between government agencies that have oversight of big volume mortgage producers. Basically, mortgage bankers are being sued because of selling lemon loans. You know the type, those loans that break down, don’t work anymore and are high maintenance. Perhaps Consumer Reports need to feature mortgage lenders in their product survey?
UBS and the many other mortgage enterprises are going to have to pay up and like some may end up with a new door made of steel. It appears the government agencies have a template for these successful lawsuits because there is a pattern that keeps appearing in the allegations such as:
► The loans contained numerous material misstatements and omissions. (At Quality Mortgage Services, we call it “mortgage fraud.”)
► Quality of origination. (Folks in the quality control space identify that as “pre-funding QC.”)
► Failure to demonstrate borrower’s creditworthiness. (We still call that ”underwriting.”)
► Failure to have underwriting practices used to evaluate and approve loans. (This one has many names so for the sake of this blog l will use “QC Plan.”)
► Last but not least, failure to conduct adequate due diligence. (Looks as if following the “QC Plan” and also performing post closing quality control was the last thing from the management’s mind.)
It is easy to point the finger at USB and the many mortgage lenders who have had their day in court, but where was the government oversight during the time the loans were being made, and where was the oversight prior to the loans being securitized? Don’t we look under the hood, test drive, and maybe have another mechanic look at a car prior to purchasing so that we don’t have a lemon?
Quality Mortgage Services is a quality control company that if used by these lenders may have advised the lender or securitizing enterprises of the lemons.