To our readers: The following is an e-mail that we received in response to a column earlier this month. We pass this on to you for information only, and suggest that you come to your own conclusions:

I am writing in response to your column about the divorcing woman who, because of the mortgage crisis, had to turn to her parents for financial help. For fear of losing my job, I am sending this message from a computer at a public place using a fictitious e-mail address so it can’t be traced back to me. I hope you will print this for your readers, but if you don’t because of the way you are receiving this information, I certainly understand.

I don’t claim to be a financial genius, but I have worked in the underwriting department of a large mortgage loan company for the past ten years. Based on what we were told to do when processing loan applications in the past, I can tell you that the reports you see on the news about bad loans are severely understated.

The gist of what we were told is that a large part of the American economy depends on the number of new housing starts which, in turn, meant jobs for more people which, in turn, means more taxes collected by the government. We were told that if new houses were not sold, there would be a downturn in the economy and, therefore, we should do everything possible to make sure loan applications were approved.

We were told that when people could not afford the mortgage payment on a regular 30- year mortgage, they should be pushed to apply for adjustable rate mortgages with interest-only payments for five years and then a balloon payment of principle. We were also told to push home equity loans and, in some instances, based on inflated internal appraisals done by a company controlled by our company, many of these new houses were financed for more than they were actually worth.

We were told that whether or not the homebuyer could make the payments was not our problem because our company would be selling these mortgages to investors and they, not our company, would assume the risk.

Based on these instructions, I know of thousands of loans that were doomed for foreclosure from the date of closing, even assuming no family disruption. But when there is a divorce, many, many people will not be able to save their homes because underwriting guidelines have now changed to what they should have been in the first place.

Like many in our industry, my bonuses have depended on the profitability of our company, so I have shared in the greed that overwhelmed so many mortgage companies in past years. I have done well financially because of artificial lending guidelines, but with the severe downturn in the number of loans, many of my co-workers have been let go and we have been told not to talk. I may be next. I hope you print this so your readers will know the truth about why they are having these problems -- and why it’s just a matter of time before it all explodes.


SoloFact:: This e-mail arrived on Monday, October 15, 2007, the day before the Secretary of the Treasury announced that the housing debacle was worse than had been reported. If this is true, where were the regulators and our Congress?