Mortgage Lenders Under Government Scrutiny

Topping the list of institutions under fire are the familiarSecretary Timothy Geithner.
faces of Fannie Mae and Freddie Mac, the posterNot unfamiliar to federal scrutiny, Countrywide came
children for good intentions gone bad. The governmentunder the federal microscope again last year, this time
entities faced renewed federal scrutiny earlier thisby a federal bankruptcy court official. Accused of
year. What to do with the troubled HUD groups,destroying, losing or misplacing $515,000 in checks
however, is still up in the air. The issue is delayed untilissued by homeowners, the home lender was further
after the current federal bank restructuring effort isaccused of adding inappropriate charges to the
completed, which is anticipated by year-end.bankruptcy debt of homeowners.
Reformation is definitely on the horizon for these twoCountrywide eventually worked out a deal with the
lenders. The Treasury Department is considering ancourt; however, the Justice Department challenged the
expansion of options on guidelines officials released insettlement due to some unsavory terms presented by
June regarding both lenders. Privatization, nationalism,the mortgage lender. A non-disparaging clause was
hybrid strategies are all being measured for reform.included, which caused the judge in the case to
Fannie and Freddie were taken into conservatorshipapprove a probe of Countrywide's entire systems by
by the federal government last year as the financialthe U.S. trustee.
crisis spread. Governmental control seemed inevitable.Many mortgage lenders letting loans for reverse
If the two were to collapse, it was thought that themortgages are now being examined under federal
damage would be irreparable and more widespreadscrutiny. Some lenders responsible for predatory
and devastating than even the Lehman Brothers'lending have now turned to high-pressure tactics and
failure.broad-yield premiums intended to rip off elderly
Reform is critical, since these entities provide thehomeowners. Michael S. Blume, U.S. Attorney, noted a
majority of home loans in the U.S. The U.S. Treasurydramatic increase in reverse mortgage loan numbers.
Department was authorized to purchase Fannie andBank of America and Wells Fargo, along with insurers
Freddie mortgage securities through the end of thislike MetLife and Genworth, heavily invest in reverse
year. Legislation is anticipated to extend the Treasury'smortgages worth about $17 billion annually. The FHA
conservatorship through the end of 2010.insures most reverse mortgages. Lenders are
Wells Fargo, the receiver of $25 billion in bank bailoutapproved by HUD. Borrowers are required to meet
money, was the primary lender on two recentlywith HUD-approved counselors prior to being approved
shuttered businesses in Alabama. Wadley companyfor the reverse mortgage loan. New certification
Plantation Patterns and Anniston corporation Annistonrequirements have resulted in a reduction of
Sportswear both filed for bankruptcy, and Wells Fargocounselors available nationwide, alongside an increase
was the primary lender for both companies. Accordingin the number of reverse mortgage loans.
to federal statistics and a local mayor's report, a totalThe similarities of subprime loans to reverse
of more than 660 jobs were lost in both closings.mortgages are eerily similar in their predatory lending
Birmingham-based Meadowcraft is the parentpractices. Senior homeowners are strongly
company of Plantation Patterns. Chicago-basedencouraged to avoid high-pressure sales that involve
Hartmax Corporation is the parent company ofadd-on products and services for reverse mortgages.
Anniston Sportswear.For more mortgage lenders under federal scrutiny,
Wells Fargo's apparent refusal to work with eithercheck out the Federal Trade Commission website at
business brought federal scrutiny. In two separateFTC.gov. You'll find formal complaints and current
incidents, the lender was named by over 40 memberscases being prosecuted by the federal government.
of Congress in complaints written to Treasury