Ever since President Obama announced his plan to forestall foreclosures, many of those lucky enough to have burned their mortgages have angrily suggested that less frugal homeowners get the Creep of the Week award.
While acknowledging such prodigal-neighbor-resentment, I am giving the award this week to a much more malevolent, seriously more depraved subprime creep: Stanford L. Kurland. This is a guy who profited from creation of the sub-prime mortgage crisis as former president of Countrywide Financial and who is now profiting from the wreckage caused by those sub-prime mortgages - both at the expense of taxpayers.
The best description of this appeared in the New York Times in a column by op-ed writer Gail Collins: "It's like Jeffrey Dahmer selling body parts to a clinic." Or this, in a Times story by Eric Lipton: "It is sort of like the arsonist who sets fire to the house and then buys up the charred remains and resells it." That's from Margo Saunders, a lawyer with the National Consumer Law Center. The center tried to stop abusive lending by the likes of Countrywide, which during the heyday of sub-prime was the largest mortgage lender in the nation but in the past nine months has been sued by several states contending it defrauded borrowers by hawking defective mortgages that quickly went to foreclosure.
The guy in the bungalow next door may have made some mistakes. He bought a house he couldn't afford with a mortgage he couldn't pay and then slid his credit card to get a big screen TV and a dirt bike for his kid. But here's the thing, when Countrywide sold him on that loan, he just didn't understand it. All the old fogies out there with their glorious fixed-rate mortgages can call him stupid. But he wasn't. He was duped. There's a reason these were called predatory loans. The prey was that guy in the bungalow next door.
The predator was Stanford L. Kurland and his ilk who all profited a plenty from little guys not understanding that the low "introductory" interest rate would balloon into one that made the monthly payments completely unaffordable. Yes, some applicants lied about their income to qualify for loans, but often that was encouraged by loan processors, who made money on each loan they sold. And in other cases, the loan processors provided those false wage figures themselves for what's now known as liar loans. Ultimately, it was the banks that weren't requiring income verification or any income information at all.
The neighbor reaching for the American Dream isn't at fault. It's the bankers - Kurland and company - who urged dreamers to sign the dotted line knowing the loan would never work out, knowing a bank would never grant such a mortgage if it were going to remain on the books of a local institution.
That didn't happen. Mortgage brokers like Kurland pushed these loans because they knew they were going to immediately dump that trash. These loans became that oxymoron: "toxic assets." They were packaged and peddled on Wall Street in bundles as securities. Then companies like AIG sold insurance on them.
It all started falling apart when the real estate market slipped. That wasn't supposed to happen. None of those Wall Street wizards who had made untold billions on this scheme had calculated a drop in the market. Suddenly, no one knew the value of the "bundles," because each contained an unknown number of good and bad mortgages. Banks started to fail. Taxpayers provided $700 billion to prop them up - including Bank of America, after it bought the financially-sputtering Countrywide.
But Kurland's not hurting. He cashed out of Countrywide before its stock tanked, taking $200 million with him. He used some of that money to set up a new company: PennyMac. For about 38 cents on the dollar, PennyMac buys bad mortgages from the federal government -- which got them with taxpayer money from failing banks. Then PennyMac gives homeowners the opportunity to refinance at affordable rates - perhaps rates that Kurland, as president of Countrywide, should have been offering in the first place. Fine, Kurland's PennyMac gives the guy in the bungalow next door payments low enough to let him stay.
But the cycle of mortgaging is costing taxpayers 62 cents on the dollar.
Kurland's got taxpayers coming and going. And for that scam, far more than any poor homeowner, he richly deserves the Creep of the Week Award.