Richard Bitner, Teller of Subprime Tales

I've been meaning for a while now to link to Richard Bitner, a former subprime mortgage broker who has published a very readable book entitled "Greed, Fraud & Ignorance: A Subprime Insider's Look at the Mortgage Collapse". Here's a taster:

Although the industry had no published standard, five years of funding and selling subprime mortgages told us that 10% was an acceptable deviation for our four investors: Countrywide, RFC, Household, and Citi. This means that if the investor's underwriter thought the property was worth $310,000, they'd accept an appraised value of up to $341,000. Anything above this threshhold ran the risk of being declined.

Yep, a loan which officially had a loan-to-value ratio of say 95% could actually have a loan-to-value ratio of 104.5%, using the investor's own appraisal!

Bitner is also great on personal color. For instance, here he is on Richard Bell:

I, as a wholesale lender, never suspected him of anything remotely suspicious. In one case, I remember him calling me on a loan in process and out of the blue saying he needed to cancel the Gonzalez file. He just caught the borrower trying to pass off phony pay stubs and he did not want me to get stuck with a fraudulent deal. He went on to say that he called the local FBI field office and informed them of what happened. When I contacted the FBI office directly, I verified his story. From my perspective it was ultimate selfless act. He could have turned a blind eye, made his income and no one would have known. Instead, he saved me from what likely would have been a costly loan repurchase...
When I sold my interest in my company in late 2005, I seriously contemplated going into business with Richard and moving my family to Houston...
He was originally charged with over 6 counts of bank fraud but struck a deal to reduce everything down to two charges. When sentencing comes in April, he could face upwards of 35 years in jail.
Was I lucky to have avoided the carnage of Richard Bell? It sure seems that way. Like other brokers before him, I could easily have been thrown under the proverbial fraudmobile, but was somehow spared. I have witnessed more than most when it comes to the greed and carnage of this industry and after a while you almost become immune to it. But after hearing this news, you will excuse me if my faith in humanity has become a little shaken.

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