When bad loans are made, bad lenders will make them

CJR's Ryan Chittum finds another gem on the credit crisis.

The Center for Responsible Lending has released a report on the failings of California lender, IndyMac.

It's a nice arrow to have in the quiver when people start telling you that "people took stupid loans, or were victimized by greedy brokers."

CRL report highlights the what that previous statement is lacking: The bankers were plenty greedy, too.

IndyMac wasn't duped, they were hip deep in writing bad loans.

The report lists a case where a 68 year old retiree was applying for a mortgage on a house she owned - to pay off some debts. She earned (and disclosed) a fixed income of around $500 a month. She said she could afford a payment of no more than $120 a month.

Unbeknownst to [her], the processors at American Residential and IndyMac assessed her income at $1,100 a month and higher.

And then they did this:

...IndyMac instructed the mortgage broker to send copies of her Social Security award letters with the dollar amounts expunged: “Need copy of SSI letter blacked out for the last 2 yrs w/no ref to income.”

As in, we've fudged her income on a number of documents, don't let her actual income make it into our records.

This lady disclosed her income truthfully, told her lender what she was able to afford, and was promised a fixed interest rate of 3.875.

She got an adjustable rate loan, with a teaser rate that jumped after one month. Her interest rate has been as high as 10%.

Now, picture yourself in this person's shoes.

You've been honest with your lender and they've told you you're getting what you want, with rates you can afford. Then you find out you're not getting what you want, you can't afford the payments, and the lender won't deal with you.

You'd sue, right?

This lady makes $500 a month. The only reason she's got a lawyer is because her case looked good to an attorney who will take a third of her winnings - if she wins.

In the meantime, she still has to make payments on a loan that should never have been given.

Wanna bet there are people out there who are just as screwed who don't have lawyers? Or are afraid to spend months/years in court?