Confessions of a Predator Lender – Review by Martha A. Cheves, Author of Stir, Laugh, Repeat; Think With Your Taste Buds; A Book and A Dish
“During the eighteen months the Otts have had their home, they have paid only part of the interest and none of the principal. Now, that the reset date has arrived, I’m not surprised that shock and awe has set in. Their new payments will be three, maybe even four, times the amount of the monthly payments they’ve been making. I could explain to Sally that they can’t refinance a house that’s worth less than the amount they owe. I could explain to her that their house is a piece of paper, called a mortgage-backed security, that’s been sold and resold. Their home is identified by a serial number, rather than a family name Whoever owns a share of the Otts’ CDO has never seen photos of Sally, John, Haley, and J. J. And if Big Lou and Steve can’t come up with a viable solution for our bank, very soon I will be in the same position as the Otts.” (Quote from Confessions of a Predatory Lender)
Lewis ‘Big Lou’ Goode is the CEO of Goode Mortgage Bank. This is the bank his own father created years ago. Now, the bank has branches extending throughout the U.S. But Big Lou wants his bank to grow even bigger. How? By flooding the mortgage lending market with new products, which will allow just about anyone to qualify for a mortgage. With loan products the customer can buy with no money down, without the best credit references, such as the ARM programs, they can pay just some of the interest and none of the mortgage at a lower interest. Then a few months down the road after the new homeowner has had time to build up a little nest egg, the loan will jump up to a higher interest rate. But by then they will be in better financial shape to make the higher payments. This is just one of the products Big Lou has highlighted to his newest graduating class of loan officers. And when he talks about the money they themselves will profit from these sales, greed can’t help but kick in.
Greed is exactly what Christy Palus feels as she climbs the ladder to success. As she and her best friend Megan begin to live their dreams of great cars, clothes and even a houseboat, Christy finds herself betraying, not only Megan, but anyone else who seems to get in her way. She isn’t proud of what she does to rise up the ranks, but does see it as something that must be done. When her very first buyer comes back to her for yet another Big Lou deal, in the form of a cash out loan, and her gut tells her this isn’t such a good idea for the customer, again greed steps in to remind her that the customer is really the greedy one by wanting more.
Then it happens. The housing bubble bursts. The customers can’t pay and the banks are running out of money to loan. The housing market is going down the tubes with no relief in sight. Loans were made, loans were sold, and the housing values are dropping, leaving everyone out in the cold. Will Christy herself survive? Should she survive? Is she the ‘Predatory Lender?’
I’ve seen the events within this book happening all around me. I’ve known young couples who would never have qualified to buy, had the loans been given on the merit of credit, job and stability. I’ve seen them spend the money they saved with lower interest rates, even though they knew in the back of their minds that the rate would soon go up. I’ve seen the stress these financial situations have put on couples, some enough to split them up. And I’ve seen the houses being foreclosed on, due to the rise in their interest rates. But this hasn’t affected just those who have and will lose their homes. It’s affected all of us through the property values of our homes. Even in the condos where I live, there have been foreclosures with the banks selling the property way below the mortgage. With just a few foreclosures within an area, you end up with the decrease of all property around it. Although Confessions of a Predator Lender is a book of fiction, it has opened my eyes, showing me exactly how and why this has and is still happening. It all boils down to one word… Greed. This is a book filled with humor and truth and well worth reading.