California Attorney General and some other heavy hitting States are suing Countrywide and its President (Sambol) and CEO (Mozilo) for deceptive practices. That's better than the senate did. I guess the State Attorneys don't campaign as hard as the Congress, and therefore sell their souls to their supporters.
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Related but different. A new book by a reformed sub-prime lender offers some very astute ideas for real reform. The author, Richard Bitner, provides a laundry list of deceptive practices, which could double as a how-to guide of course. Amongst his suggestions are:
- Require people who have regular salary income to document it with pay stubs and tax forms. "Stated-income" loans should be used only for self-employed people with fluctuating incomes and only for those who show that they have good savings.
- Require brokers to disclose from the start – to the borrower – how much compensation they will get from arranging a loan. This makes the brokers' tendency toward more self-serving loan recommendations transparent.
I still stand by my suggestion from back in February: Brokers should be required to disclose the actual payment that will result from interest fluctuations (the worst case scenario and those along the way to the nadir). This should be clear and simple -- not the buried gobbledygook that shows up in the Truth in Lending form.
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