Subprime Mortgages are Back…This Time Marketed as “Second Chance Purchase Programs”

With interest rates up sharply from the lows and Blackstone and other private equity firms holding billions of dollars with of properties with no one to sell to, the time is ripe for a little muppet fleecing. Leading the charge to find new tax-payer backed subprime loans to take some properties off the hands of Mr. Schwarzman is none other than Wells Fargo. I previously forecasted this in my piece: Stage Two of the Housing Bubble Begins: Blackstone to Lend to Others for “Buy to Rent.”

They aren’t the only ones though. Citadel Servicing Corp, the country’s biggest subprime lender, is also getting in the action. The best and worst part of this story is the way these new loans are being marketed. Specifically, as “Low Credit Score Debt Consolidation Program” as well as a “Second Chance Purchase Program.”

This Central Bankster game isn’t complicated. Provide access to cheap funds to financial cronies, pump the bubble, fleece the serfs. Rinse. Repeat.

From Reuters:

(Reuters) – Wells Fargo & Co, the largest U.S. mortgage lender, is tiptoeing back into subprime home loans again.

The bank is looking for opportunities to stem its revenue decline as overall mortgage lending volume plunges. It believes it has worked through enough of its crisis-era mortgage problems, particularly with U.S. home loan agencies, to be comfortable extending credit to some borrowers with higher credit risks.

So far few other big banks seem poised to follow Wells Fargo’s lead, but some smaller companies outside the banking system, such as Citadel Servicing Corp, are already ramping up their subprime lending. To avoid the taint associated with the word “subprime,” lenders are calling their loans “another chance mortgages” or “alternative mortgage programs.”

It is looking at customers with credit scores as low as 600. Its prior limit was 640, which is often seen as the cutoff point between prime and subprime borrowers. U.S. credit scores range from 300 to 850.

Lenders remain cautious in part because of financial reform rules. Under the 2010 Dodd-Frank law, mortgage borrowers must meet eight strict criteria including earning enough income and having relatively low debt. If the borrower does not meet those hurdles and later defaults on a mortgage, he or she can sue the lender and argue the loan should never have been made in the first place.

Subprime mortgages were at the center of the financial crisis, but many lenders believe that done with proper controls, the risks can be managed and the business can generate big profits.

Still, Wells Fargo isn’t just opening up the spigots. The bank is looking to lend to borrowers with weaker credit, but only if those mortgages can be guaranteed by the FHA, Codel said. Because the loans are backed by the government, Wells Fargo can package them into bonds and sell them to investors.

Taxpayers lose again.

The funding of the loans is a key difference between Wells Fargo and other lenders: the big bank is packaging them into bonds and selling them to investors, but many of the smaller, nonbank lenders are making mortgages known as “nonqualified loans” that they are often holding on their books.

Citadel Servicing Corp, the country’s biggest subprime lender, is trying to change that. It plans to package the loans it has made into bonds and sell them to investors.

Citadel has lent money to people with credit scores as low as 490 – though they have to pay interest rates above 10 percent, far above the roughly 4.3 percent that prime borrowers pay now.

But smaller, non-bank lenders are making more loans. One such company, ACC Mortgage in Maryland, is offering a “Low Credit Score Debt Consolidation Program” as well as a “Second Chance Purchase Program.” Low credit scores don’t matter. Neither do bankruptcies, foreclosures or short sales.

Happy Valentine’s Day Stephen Schwarzman.
Kisses,
Wells Fargo

Full article here.

In Liberty,
Michael Krieger

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3 Comments

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  1. You mentioned the Dodd-Frank LAW and the consequences of violating it ! Jamie Dimon’s JPMorgan has committed numerous violations of Securities and Banking laws without any action being taken by Attorney General Holder or any other U. S. Government Agency ! Do you really believe any action will be taken if the watered down Dodd-Frank Laws are violated ? I doubt it very much ! Just another ” TAX PAYER BAILOUT ! “

    • The Vampire Squid, JP Morgan, Dead Bankers & Criminal Acts

      Eric King: “Bill, you’ve been around this business for decades, and when you look back at what the banking industry was and what it represents today, what are your thoughts on the monster the banking industry has become, where people are killed in order to protect secrets?”

      Kaye: “I don’t recognize the industry. It bears no resemblance to the business that I very proudly entered in the 1970s. When I joined Goldman Sachs it was not only a private partnership, but I think there were a total of only 47 general partners at the time. Now, Goldman Sachs has been famously described as the ‘Vampire Squid,’ with their tentacles virtually everywhere, including governments….
      “They (Goldman Sachs) and their cohorts have essentially hijacked Washington, and to a significant extent the government in London, as well as much of Europe. So the Western world is essentially being held captive by both of these major predatory investment banks, including the major commercial banks such as JP Morgan — they are working hand-in-hand together in many cases.
      This is a huge threat, not only to the financial system, but what they are doing is a huge threat to people’s individual liberty. I think what these people are doing for their own benefit also has implications that are very negative to the middle classes around the world, which are being slowly wiped out in many countries.
      http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2014/2/16_The_Vampire_Squid%2C_JP_Morgan%2C_Dead_Bankers_%26_Criminal_Acts.html

      this answers your question.

      • Agree with you assessment of Goldman Sachs and JPMorgan ! However , the main problem goes deeper than these two organizations !
        With all the violations of Securities , Banking , and Statuary Laws , where are the U. S. Government Departments ( I.R.S. , C.F.T.C., S.E.C. , as well as others ) designed to enforce the U. S. Laws . It is only when the HEADS of each Department ( All members of the ” Tribe ! “) is it evident as why no one has taken any action !
        http://tomatobubble.com/id199.html

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