|Img: $BAC via StockCharts, +Flickr (TheConsumerist)|
Eileen Foster at Countrywide (read the full 60 Minutes script)
Kroft: How much fraud was there at Countrywide?
Foster: From what I saw, the types of things I saw, it was-- it appeared systemic. It, it wasn't just one individual or two or three individuals, it was branches of individuals, it was regions of individuals.
Kroft: What you seem to be saying was it was just a way of doing business?
In 2007, Foster sent a team to the Boston area to search several branch offices of Countrywide's subprime division - the division that lent to borrowers with poor credit. The investigators rummaged through the office's recycling bins and found evidence that Countrywide loan officers were forging and manipulating borrowers' income and asset statements to help them get loans they weren't qualified for and couldn't afford.
Foster: All of the-- the recycle bins, whenever we looked through those they were full of, you know, signatures that had been cut off of one document and put onto another and then photocopied, you know, or faxed and then the-- you know, the creation thrown-- thrown in the recycle bin.
Kroft: And the incentive for the people at Countrywide to do that was what?
Foster: The loan officers received bonuses, commissions. They were compensated regardless of the quality of the loan. There's no incentive for quality. The incentive was to fund the loan. And that's-- that's gonna drive that type of behavior.
Kroft: They were committing a crime?
After Foster's investigation, Countrywide closed six of its eight branches in the Boston region and 44 out of 60 employees were fired or quit.
Kroft: Do you think that this was just the Boston office?
Foster: No. No, I know it wasn't just the Boston office. What was going on in Boston was also going on in Chicago, and Miami, and Detroit, and Las Vegas and, you know-- Phoenix and in all of the big markets all over Florida.
Richard Bowen at Citigroup (read the full 60 Minutes script)
"Until 2008, Richard Bowen was a senior vice president and chief underwriter in the consumer lending division of Citigroup. He was responsible for evaluating the quality of thousands of mortgages that Citigroup was buying from Countrywide and other mortgage lenders, many of which were bundled into mortgage-backed securities and sold to investors around the world. Bowen's job was to make sure that these mortgages met Citigroup's own standards - no missing paperwork, no signs of fraud, no unqualified borrowers. But in 2006, he discovered that 60 percent of the mortgages he evaluated were defective.
Kroft: Were you surprised at the 60 percent figure?
Bowen: Yes. I was absolutely blown away. This-- this cannot be happening. But it was.
Kroft: And you thought that it was important that the people above you in management knew this?
Bowen: Yes. I did.
Kroft: You told people.
Bowen: I did everything I could, from the way-- in the way of e-mail, weekly reports, meetings, presentations, individual conversations, yes.
Bowen also asked for a formal investigation to be conducted by the division in charge of Citigroup's internal controls. That study not only confirmed Bowen's findings but found that his division had been out of compliance with company policy since at least 2005.
Kroft: Did the situation improve?
Bowen: I started raising those warnings in June of 2006. The volumes increased through 2007 and the rate of defective mortgages increased to an excess of 80 percent.
Kroft: So the answer is no?
Bowen: The answer is no, things did not improve. They got worse."
Wow, and these companies still trade (Countrywide = Bank of America) after fraud was bailed out by the government! ΔΠΩTHΣR βΔILΩUT PLΣΔSΣ… (h/t jediphone)
Citigroup to cut 4,500 jobs (Bloomberg) "*will take a charge of about $400 million in the fourth quarter"
Bank of America's Shareholder Suicide Vote to Increase Shares Outstanding (CNBC Stock Blog)