Foreclosure Crisis

Inside the Subprime Mess, By An Insider

Richard Bitner has written a book about his experiences as a subprime lender, and he’s making the rounds now talking about that book, and those experiences, as evidenced by a Newsweek article (”Confessions of a Subprime Broker“). Bitner’s portrayed as a do-gooder, who wanted to help the less fortunate achieve the dream of homeownership but rapidly became disillusioned by the conduct of sleazy, greedy brokers:

His biggest criticisms, though, are reserved for mortgage brokers and appraisers. As Bitner describes it, lenders like his company, which underwrote loans offered up by brokers and resold them to giants like Countrywide, spent much of their workdays trying to spot the stupid tricks brokers routinely used to get unqualified borrowers approved for loans. They’d say a buyer intended to live in a house when it was really an investment property. They’d falsify the buyer’s income by having a relative pose as his employer, or use scanners and software to forge W-2 forms. They’d find ways to hide debts (like a car payment) by looking for a credit report that omitted key data. They also routinely gamed the appraisal system, encouraging appraisers to look for “comparables” that were far nicer homes in better neighborhoods—all in an effort to drive up the appraised value of the home they were mortgaging.

OK — fair enough. The broker conduct described above is by any measure pretty sleazy and warrants censure.

But then I read this:

Disillusioned and realizing the subprime business was becoming less and less profitable, Bitner cashed out of the industry in 2005. And when the subprime market collapsed last year, he decided to tell his story in a new self-published book, “Greed, Fraud & Ignorance: A Subprime Lender’s Look at the Mortgage Collapse,” which is for sale on his Web site and at Amazon. Today he’s promoting the book full-time. “I could afford to take a year off and do this,” he says in an interview. “I want some positive change to come from this.”

Emphasis mine.

Yes, Bitner can afford to take a year off — because he brought in, routinely, an annual income in the “high six figures” (disclosed in the article). I’m not sure how I feel about someone who participated in the subprime industry meltdown now profiting off of it yet again.

It isn’t suggested that Bitner himself engaged in any wrongdoing, and I’m certainly not making that allegation here. In fact, it’s Also, I suppose, it’s better to have this information than to not have it, and who better to report it than an insider, as Newsweek suggests?

On the other hand, there’s this quote:

Bitner says his company did its best to figure out whether borrowers really would be able to repay their loans. But mostly it deferred to the standards set by industry behemoths to whom it resold mortgages.

Again, emphasis mine.

So, yes. It sort puts me off a bit to hear that a player in the get-rich-off-the-backs-of-subprime-borrowers game is getting even richer now by writing about it, even though he apparently has the best intentions now. Yet another sad result from this whole mess.

© 2008 SC Bankruptcy & Consumer Law Blog.