Book Review: Confessions of a Subprime Lender

Confessions Interesting looking book flagged by the WSJ, called Confessions of a Subprime Lender.

The story is told by Richard Bitner, who founded his own subprime mortgage company right as the industry was taking off. Over five years, the company boomed.

Confessions of a Subprime Lender is his insider story — disillusionment, fraud, greed, ignorance. A year after he gets out and leaves the industry, sub-prime imploded.

From the publisher: "Woven throughout his
personal industry experiences is the fascinating story of how an
industry started out helping disadvantaged customers buy houses, but
soon lost its way due to greed, lack of financial control, and willful
ignorance.  This book reveals the truth about how various parts of the
mortgage business yielded to the temptation to maximize profits,
weakening the chain that held the system together."
 

The book covers:

  • Why nearly three out of every four mortgages were misleading or fraudulent;

  • How unscrupulous brokers tricked lenders and gullible borrowers;

  • How brokers and lenders turned unqualified applicants into "qualified borrowers";

  • Why Wall Street and the rating agencies are largely to blame for the collapse;

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Funny, nothing mentioned in the book about Predatory Borrowing.

Quotes:

"Bitner’s thorough review of the subprime lending industry provides
a behind-the-scenes look at the mortgage mess. From the broker on Main
Street to the investor on Wall Street, it’s an unabridged version of
what went wrong and how it needs to be fixed."  —Bill Dallas, founder, First Franklin Mortgage, one of America’s largest subprime lenders, before it collapsed      

"This is an in-depth, eye-opening examination of the problems impacting the housing and mortgage markets."  —Matthew McIntyre, CEO, Puritan Financial Group, Inc.

This is definitely on my shortlist of Housing books to read . . . 


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Sources:
Confessions of a Subprime Lender
Richard Bitner
Wiley, 186 pages, $19.95

Money for Nothing
JAMES R. HAGERTY
WSJ June 25, 2008; Page A13
http://online.wsj.com/article/SB121435152605601613.html   

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What's been said:

Discussions found on the web:
  1. dingojoe commented on Jun 30

    I’ve read the first 40 pages or so at lunch today. Very folksy style, will be a fast read. He does give examples of what could be considered predatory borrowing, but thus far kind of portrays the people doing it as “Duke boys”–never meaning no harm (my characterization not his).

    Most of the subprime mortgage brokers he worked with all sound like they could have doubled as bail bondsmen too.

  2. SINGER commented on Jun 30

    This guy was interviewed by Jim Puplava on FinancialSense.com on this weeks broadcast

  3. john f commented on Jun 30

    Barry, I would love to get your opinion on the BAC/CFC deal that is supposed to close tomorrow. How can this deal go through? It is boggling my mind. Thanks for the great web site, I hope that I will be able to contribute in the future……JF

  4. john_doe commented on Jun 30

    Perfect 4th of July gift for Mom, maybe for x-mas to family members…. oil oil oil… yes yes yes…. higher and higher…Iran had 15 tankers holding 28mil barrels of its coast…so why the price so high, b/c Haliburton run the white house, and Iran will be 52nd state. Iraq #51. Maybe Switzerland be #53 if Haliburton finds oil, Bush claim Swiss developing WMDs…

    The French hate the Bushies… Thurs. ECB will raise rates, dollar drop, oil @ records… Happy Independence Day!!!

    From US dollar to US peso, From George Bush to Jorge Bush…

    The $$$$$ Sheikh

  5. Crabbybill commented on Jun 30

    The NYT article on Scruggs the other day mentioned that the son was up on charges of ‘misprision of felony’ – had to look it up. Sure does sound like a wonderful charge for the subprime and related financial crew!

  6. Al Czervic commented on Jun 30

    NBC national news had an interesting segment on Countrywide this evening.

    According to Brian Williams, this is the first time a manager from inside the company has spoken out. The guy was a regional Vice-president.

    About 3 minutes with another 3 minutes of web-only interview. Worth watching.

    Pretty devastating stuff if true. Of course Countrywide claims that he was just disgruntled.

  7. Groty commented on Jun 30

    If his hand’s are dirty, I really hope he becomes a bad man’s boyfriend in the big house.

    I hope even worse things for all the incompetent investment banking morons whose pure greed nearly brought down the global financial system.

    How anyone can hold those assholes in anything other than contempt is beyond me.

  8. johnnyvee commented on Jun 30

    BR: Enough with the tired “predatory borrowering” angle already. It’s a weak, at best, argument for any point that you may be trying to make.

  9. VJ commented on Jun 30

    You STILL don’t get it.

    Intentionally unregulated Predatory Lending is THE point.
    .

  10. Bob A commented on Jul 1

    This is becoming known as the ‘Subprime Crisis’ but that’s really not the whole story.

    As big or bigger a problem than “subprime” lending (to those with low credit scores) was the unprecedented availability of 100% LTV lending with an 80% first and 20% variable rate HELOC second.

    I large percentage of borrowers defaulting and walking away from homes bought with 80/20 loans that are now deeply underwater… in some places as much as 50% from what I’m hearing.

    This also increased demand by bringing countless new buyers into the market which was largely responsible for driving up prices and overbuilding.

    Now that down payments are required again, huge numbers of buyers are no longer in the market.

    Cash out up to the max, pay off your credit cards, take a vacation, buy a Harley…
    Wall Street begged people to take advantage of these loans and they did. Don’t blame the freakin borrowers.

    The real problem was corporate irresponsibility of epic proportions.

  11. sean commented on Jul 1

    Predatory borrowing is absolutely the issue..If getting someone a loan for a house they can’t afford is “predatory”, then pretty much any loan officer who originated a loan(any loan) in California over the last 5-6 years is a predatory lender..

  12. chris_gee commented on Jul 1

    Hmm. I guess the subprime borrowers were the brightest of the bunch. I guess they deserved whatever they got. Seen any kids with candy lately?

  13. Greg0658 commented on Jul 1

    John Doe – maybe the 15 tankers are a deterrent – how deep is the Strait of Hormuz?

  14. Dan commented on Jul 1

    I love how the normal consensus in the media is that it was all “Predatory Lending” by brokers.

    I worked as a loan officer for a broker while I was in college from 2002-2005. We sold loans based on the qualification standards set by the banks. They lowered those standards because the iBanks would buy anything.

    I’m sure there was some predatory lending going on, as well as predatory borrowing, but neither caused the problem we have today.

  15. jj commented on Jul 1

    “… misleading or fraudulent … unscrupulous … tricked … gullible”

    Sounds like business as usual in the US. Has it ever been any different? Fortunes are usually made at the expense of someone else. Those fortunes are few while the majority of hard-working Americans are left holding the bag …

  16. Tim commented on Jul 1

    There certainly seems to be no lack of opinion, vitriol, and finger-pointing on this subject. But having read the book, I can also say “there’s no shortage of blame.” All the parties participated to one extent or another. There were duped borrowers and there were others who played the system. There were brokers shading the truth and there were others who pulled a deal because they found out something was wrong. There were lenders who bought everything offered by a broker and others who insisted on levels of quality. There were rating agencies, investment banks and regulators on both sides of the line.

    As I used to point out to my students “when you see a problem, point the finger…and remember three point back at you.”

  17. VJ commented on Jul 1

    Follow the money.

    Cui Bono ?
    .

  18. DMB commented on Jul 2

    “There’s no shortage of blame.” Sounds about right to me. However, I think this whole fiasco of subprime or whatever we might call it is only indicative of one enduring rule that history has proven to be periodically shoved aside: CAVEAT EMPTOR. Through this whole fiasco there seemed to be a successive decline in the borrowers’ ability to make a smart financial decision. And (of course) there was a successive growth in lenders (brokers, banks, ibanks all the way up the chain of the lending process) who were ready and willing to take advantage. One rule in every aspect of life: CAVEAT EMPTOR

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