Back in the late-housing-bubble period, in 2007, Countrywide Home Loans, which was then the largest mortgage provider in the country, rolled out a new lending program. The bank called it the ‘high-speed swim lane,’ or HSSL, or, even more to the point, ‘hustle.’ Countrywide, like most mortgage lenders, sold its loans to Wall Street banks or Fannie Mae and Freddie Mac, two mortgage giants, which bundled them and, in turn, sold them to investors. Unlike the Wall Street banks, Fannie and Freddie insured the loans, so they demanded only the ones of the highest quality. But by that time, borrowers with high credit scores were getting scarcer, and Countrywide faced the prospect of collapsing revenue and profits. Hence, the hustle program, which ‘streamlined’ Countrywide’s loan origination, cutting out underwriters and putting loan processors, whom the company had previously deemed not qualified to answer borrowers’ questions, in charge of reviewing loan applications. In practice, Countrywide dropped most of the conditions meant to insure that loans would be repaid.
The company didn’t tell Fannie or Freddie any of this, however. Lower-level Countrywide executives repeatedly warned top executives that the mortgages did not fulfill the requirements. Employees changed data about the mortgages to make them look better, sometimes increasing the borrower’s income on the forms until the loan looked acceptable. Then, Countrywide sold them to the mortgage giants anyway.
At one point, the head of underwriting at Countrywide wrote an alarmed e-mail, with a list of questions from employees, such as, does ‘the request to move loans mean we no longer care about quality?’
This post was published at Zero Hedge on 05/27/2016.
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