Being a veteran of the sub-prime wars, the revelations emerging in the Fannie-Freddie debacle are illuminating practices that previously seemed insignificant in the hey-day of my mortgage brokering career. While rates were low and standards were lower, mortgage brokers were inundated with applications. Mortgage-lead companies and telemarketers plied our office in Carmel, Indiana with hot-lists of borrowers ready to try their hands at home ownership.
All the talk about the Community Reinvestment Act, the involvement of ACORN and the clear emphasis on developing minority home-ownership frankly comes as a surprise to me. Having grown up in and begun my career in Detroit, I was accustomed to having a large percentage of my business come from the black community. I assumed I was just getting more of the same.
In hindsight, a series of conversations I had with representatives from Countrywide has become illuminating. There is a portion of Fannie Mae Form 1003, the basic mortgage loan application, that is listed as "Information for Government Monitoring Purposes." In this section, the loan officer, together with the mortgage applicant, describes the potential borrower's Ethnicity, Race and Sex. There is also a section to describe the nature of the interview: one fills in either "Face-to-face; Mail; Telephone, or Internet."
On at least 3 separate occasions, I was contacted by a representative from Countrywide to "correct" the Government Monitoring" portion of my client's application after submitting the file for underwriting. The conversation went something like this:
CW Underwriter: I need your help on the "Smith" file. We need you to complete the Government Monitoring Section of the 1003.
Broker: I did complete the Government Monitoring section.
CW Underwriter: But you haven't filled in the borrower's Race or Ethnicity.
Broker: If you notice, the Borrower checked the box indicating: "I do not wish to furnish this information."
CW Underwriter: You also checked the box indicating that this interview was done face-to-face.
Broker: So?
CW Underwriter: So you saw him. Is he black?
Broker: I don't understand. My client indicated his preference to keep this information to himself.
CW Underwriter: Well, you saw him and you know his race and ethnicity. Our ability to fund our deals and source new money depends on doing a certain percentage of loans with black and minority clients. If you want this loan underwritten at Countrywide, you need to furnish this information: Is he black?
The emphasis on minority lending is readily apparent, even at the expense of the applicant's stated desire not to furnish this information. As Countrywide became one of the first and most obvious dominoes in the collapsing Rube Goldberg mortgage apparatus, the need for an investigation of the relationship between Fannie Mae and Countrywide seems abundantly clear, to determine the extent of racial strong-arming.
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