In my own personal opinion, CNC's due dilligence is likely to uncover certain Federal RESPA (Real Estate Settlement Practices Act) violations as it applies to truth in disclosure to homeowners with their home equity mortgage loans. Green Tree's securitizations not only have prepayment miscalculations, but RESPA violations, as well.
In other words, Green Tree pays kick backs to their dealers in their network in order to provide an incentive for dealers to send them loan applications. After the homeowner thinks that he or she has made the best deal possible with the dealer, the dealer and the lender (Green Tree) have a secret arrangement to further pick the pockets of the homeowner.
You will even find a dealer discussing this on the Green Tree message board. It bothered me after my mother-in-law financed her 2nd moblile home with Green Tree. She has since refinanced with another lender.
RESPA requires that a lender disclose to homeowners all the cash flows in a mortgage loan on the HUD-1 Settlement Statement. The kickback is listed on the HUD-1 as "Fee for Attorney" or "Signing Service Fee".
Homeowners are being misled. They are not told that this fee is actually being paid DIRECTLY to the dealer and represents more profit for the dealer. With this kind of deception, Green Tree kicks back several hundred dollars on each deal, and pays additional bonuses for large volume. This could total an average of nearly $1,000 per loan. For example, a reasonably successful home improvement dealer could end up with $100,000's in kickbacks per year.
With this kind of incentive at stake, a dealer isn't likely to care whether or not the loan terms are the best terms available for the homeowner. Homeowners are further gouged if they end up paying higher rates and fees over other more competitive programs. In some states, like the ones where Green Tree does most of its business (CA, IL, FL), when you are "brokering" loans, some states' laws require you to give the homeowner the best deal available.
Check it out for yourself. HUD has a Legal Division listed in most phone directories.
Ken |
