Subprime Scandal: ARMs sold as fixed-rate

[Replay]

Any of the rest of you hear how certain real estate corporations sold adjustable-rate mortgages as fixed-rate during the runup to the Crash of 2008? Borrowers being promised a $500-1000 monthly payment and all of a sudden getting hit with $1500-2500 monthlies up to a year after the event? Clauses buried in a couple hundred pages of fine print? Illegal because the mortgagesellers told the borrowers that they would have a fixed rate? Mortgages diced up and sold to as many ten different buyers?

Taibbi as usual nailed it:

Nowhere was that more in evidence than in this case, Lawrence E. Jaffe Pension Plan v. Household International, Inc., et al., where a major trafficker in subprime and "alternative" mortgage products schemed in every conceivable way to get low-income, high-risk borrowers into as many dangerous mortgages and refinance deals as they could.

Thankfully, the principals in this case left behind a treasure trove of amazingly disgusting videos and internal memoranda showing in graphic detail an elaborate, company-wide plan to herd unsuspecting high-risk borrowers into bad loans. We can share some of that evidence here, with particular emphasis on the firm's "training videos," and I can pretty much guarantee that some readers may actually vomit with rage when they watch them.

http://www.rollingstone.com/politics/ne ... l-20131212

2013 saw a precedent where even the untouchable Goldman saw a trader indicted for civil securities fraud for a similar kind of subprime wrangling - in this case, selling similar subprime catastrophes in a massive bundled bond scheme that fell apart as soon as it was sold.

http://dealbook.nytimes.com/2013/08/12/ ... ates/?_r=0

GE began to be under investigation in 2012 for EXACTLY the practices mentioned here.

http://www.publicintegrity.org/2012/01/ ... prime-unit

A good statement about why subprime lending was in large measure responsible for a tremendous amount of fraud:

http://www.businessinsider.com/subprime ... aud-2010-4

The FDIC has a statement on subprime lending if anyone is interested! Always interested in using the forum I founded to help maintain the public good:

https://www.fdic.gov/regulations/laws/r ... -5160.html