Link to excellent NY Times article by Pulitzer Prize winner Morgenson and Joshua Rosner
nytimes.com
"Promotional memos NovaStar sent to its 16,400 unsupervised mortgage brokers across the country told the tale of easy credit terms. “Did You Know NovaStar Offers to Completely Ignore Consumer Credit!” one screamed. “Ignore the Rules and Qualify More Borrowers with Our Credit Score Override Program!” boasted another. "
" The Jordans had bought their three-bedroom home in a middle-class section of southwestern Atlanta in 1983 for $30,000. Ms. Jordan had made many improvements on the property, putting up a fence and installing an attic fan and air-conditioning. The sole breadwinner in the family, she supported her husband, a physically and mentally disabled Vietnam veteran. In 2000, she retired and they lived on Social Security and veteran benefits.
In 2004, she had a 9 percent adjustable-rate mortgage that she wanted to change to a fixed-rate loan. She received an offer in the mail from NovaStar and called the toll-free number.
“I told them I wanted to come out of the adjustable and they said they would give me the fixed rate if I would accept it at 10 percent,” Patricia said. “I could have stayed where I was but I told them definitely a 30-year fixed rate.”
The Jordans were more or less perfect targets for a lender like NovaStar. They were financially unsophisticated, and they were trusting.
Unbeknownst to the Jordans, their NovaStar loan was one of the most punitive out there: an adjustable-rate mortgage with an initial interest rate of 10.45 percent that would soon explode to 17.25 percent. Even the initial monthly housing payment, including taxes and insurance, was barely affordable: $1,215.33. As documented in their loan file, the Jordans’ total monthly net income was only $2,697. Their monthly housing and other debt costs totaled $1,642, so after they paid their debts each month, the Jordans had only $1,055 to live on.
And that was just the beginning. Two years after signing up for the loan, its interest rate was set to ratchet up. Only then did Ms. Jordan learn that NovaStar had put her into an adjustable loan, not the fixed rate she had been promised.
“I got duped,” she contended.
The Jordans sued NovaStar in 2007. As part of the lawsuit, their lawyer found that their loan had been placed in a mortgage securitization trust assembled by NovaStar and sold to investors in November 2004. More than half of the loans in the pool were provided with no documentation or limited documentation of borrowers’ financial standing.
But the Jordans had given NovaStar bank statements and other documentation of their income. The lawsuit would show that NovaStar had inflated their monthly income by $500 to make the loan work. The lender had given the Jordans a loan that went against its own underwriting guidelines and that overrode federal lending standards.
The Jordans’ was just one loan. There were literally thousands more like it. (NovaStar settled with the Jordans in 2010. The terms were undisclosed.) "
As far I back as 2007, I suggested people AVOID this company.
That's my "defense" Lol |
