Federal grand jury in L.A. probes 3 local lenders

Lender woes continue to mount.

Richard Schmitt reports today that a federal grand jury in L.A. has started probing three fallen hometown lenders and their subprime loan activities.

Subpoenas have been issued in recent weeks and months to Countrywide Financial Corp., which is now part of Bank of America, New Century Financial Corp., which is under Bankruptcy Court protection and IndyMac Bank, which was seized by federal regulators two weeks ago.

The question seems to be whether fraud and other crimes contributed to the national mortgage debacle. But several sources quoted by Schmitt suggest that the complexity of building cases against the companies may be very difficult for the feds to make.

"What they may find is a lot of incredibly sloppy practices that are not necessarily criminal," says Bert Ely, a Virginia-based banking consultant.

A Business section feature on Newport Beach-based Downey Savings & Loan sets up the thrift's dismal news today of another quarterly loss and a growing number of bad loans on its books. The results sent the CEO and board chairman packing.

Some lenders seem to be dealing with their builder clients as they are their home-loan customers. The Times' Peter Hong talks to some local builders who say that banks are making it difficult for them to work out their faltering loans, which could lead to defaults and bankruptcies.

Many builders will go under, [Barratt American president Mick] Pattinson said, because "banks aren't supporting businesses that supported them for decades."

Maybe the building industry will need its own congressional rescue similar to the one the White House has now agreed not to veto. The House housing rescue bill approved yesterday would stave off foreclosure for hundreds of thousands of homeowners.

-- Annette Haddad

Photo credit: Mark Boster / Los Angeles Times

Questions? Comments? Email annette.haddad@latimes.com

Comments

[It All Happens on the Margin]

Shhh!!! Don't tell Schumer about Downey Savings! We'd save a few billion in taxpayer dollars if we all played dumb when Chuck walks in.

[homebuyerfirst]

Sometimes these people just need to sit back and look at what they have done to others and the options that could be taken against them. We as business people should look before we leap and maybe they did and just did not realise how far the drop off was.

Homebuyerfirst

http://fiirst-time-home-buyer-s.com

[anonymous]

Annette, who do you think is paying for the "congressional rescue" of all these greedy jerks?

Here we go again, privatize the profits, socialize the losses.

Those poor, poor bulders who made a FORTUNE during the bubble didn't save a dime, did they?

You make me sick!

[Lou]

Only 3? What about WMC, Ameriquest, Downey, Fremont, and the rest of the glorified loan sharking comapnies.

[MyLessThanPrimeBeef]

I am still waiting for them to go after the Federal Reserve...at the minimum, Freddie Mac and Fannie Mae, the evil twin brother and sister who should have figured in some people's creation/destruction myth as having brought about the end of the world.

[Reinedeer]

The entire housing market is experiencing a correction. Do away with Mortgage Brokers and give it back to Mortgage Bankers. Get the Realtors out of lending. Regulate profitability on loans. Get it back to safe lending practices, integrity in lending and just plain “doing the right thing”. I love what I do. But I don’t take advantage of someone’s inexperience to make as much money as possible on them. Fair Lending, RESPA, TILA - what a force it has been. The gov should look at the BROKERS. Simple and true. Then take a look at the partnerships that have been created between realtors and brokers and see what they are building: channeling customers to mortgage brokers that have an interest in their real estate company. it’s a breeding pond for more abuse.
By Reinedeer on Jul 24, 2008

[Hugh]

" I will go out on a limb and say that there was no appraisal fraud" - SFValleyrealestate. I am curious to hear how many of these bad loans involved cooked appraisals. Now, who needs to learn about real estate? :)

[It All Happens on the Margin]

Ooops -- 2 more national banks seized by the feds today. One based in Newport.

http://online.wsj.com/article/SB121703904765687047.html?mod=djemalertNEWS