Lessons Learned:
- Being the "best of the worst" still means you are pretty bad
- #1 IPO of 2003 on Nasdaq. Short-term success, long-term failure
- If your business doesn't benefit the consumer in the long-run (3o years), it might not be around. Foreclosures and late payments are not beneficial to the consumer
- They had much higher rates than all of the other Sub Prime lenders. When pricing for risk - higher rates don't mean squat if you are over the consumer's threshold to pay.
- As far as I know, they did not do the Option ARMs. Types of loans that they did do: Stated Income, 100% financing ARMs
Sample Guidelines during 2005/2006:
- 580 Credit Score - Full Documentation (W-2's) - 100% financing loan
- 620 Credit Score - Stated Income - 100% combo financing loan
- 600 Credit Score - 1 day out of Bankcruptcy, 90 days late on mortgage, Full Doc - 100% financing loan
- They required more credit tradelines and rental verification than most other companies for these credit score thresholds.
Ethics:
- Heads of Corporate admitted that they had a former employee in 2004/2005 who closed multi-million dollars of loans per month actively committing fraud (creating false income documents) on a certain percentage of these. Employee was fired and began to work for another company. As far as I know, this was not reported to authorities. At least they fired him...
Source: http://www.accredhome.com/
2 comments:
A fixed rate mortgage (FRM) is a mortgage loan where the interest rate on the note remains the same through the term of the loan, as opposed to loans where the interest rate may adjust or "float." Other forms of mortgage loan include interest only mortgage, graduated payment mortgage, variable rate (including adjustable rate mortgages and tracker mortgages) , negative amortization mortgage, and balloon payment mortgage. Please note that each of the loan types above except for a straight adjustable rate mortgage can have a period of the loan for which a fixed rate may apply. A Balloon Payment mortgage, for example, can have a fixed rate for the term of the loan followed by the ending balloon payment. Terminology may differ from country to country: loans for which the rate is fixed for less than the life of the loan may be called hybrid adjustable rate mortgages (in the United States).
http://indiatwitter.com/adjustable-rate-mortgage.html
An adjustable rate mortgage (ARM) is a mortgage loan where the interest rate on the note is
periodically adjusted based on a variety of indices.[1] Among the most common indices are the
rates on 1-year constant-maturity Treasury (CMT) securities, the Cost of Funds Index (COFI), and
the London Interbank Offered Rate (LIBOR). A few lenders use their own cost of funds as an
index, rather than using other indices. This is done to ensure a steady margin for the lender,
whose own cost of funding will usually be related to the index. Consequently, payments made by
the borrower may change over time with the changing interest rate (alternatively, the term of
the loan may change). This is not to be confused with the graduated payment mortgage, which
offers changing payment amounts but a fixed interest rate. Other forms of mortgage loan include
the interest only mortgage, the fixed rate mortgage, the negative amortization mortgage, and the
balloon payment mortgage. Adjustable rates transfer part of the interest rate risk from the
lender to the borrower. They can be used where unpredictable interest rates make fixed rate
loans difficult to obtain. The borrower benefits if the interest rate falls and loses out if
interest rates rise.
http://indiatwitter.com/affordable-health-insurance.html
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