The book has nice vignettes showing the Kafkaesque experiences the characters go through in dealing with a mortgage industry unchecked by effective regulation. Here’s one involving a North Carolina borrower’s years-long struggle with lenders and servicers, including Fairbanks Capital Holding Corp., which ran afoul of the Federal Trade Commission back in 2003.
One of Fairbank’s favorite tricks, according to the Federal Trade Commission’s complaint, was to delay posting a monthly payment, only to turn around and charge a never-ending cycle of late fees. For Griggs, this deception wasn’t just an economic inconvenience; it was destroying his life. In 2002, Fairbanks began hounding him for a missing $680. He sent a check; it wasn’t posted. He drove up to Durham to pay in person, only to be told he was current on his bill. A few weeks later, Fairbanks once again demanded the money, saying his fees had finally been processed. Griggs sent a check, but he’d already been dismissed from Chapter 13 for failure to stay current on his bills.
And it usefully reprises material already in the public domain that demonstrates that it was no accident that African Americans, even creditworthy ones, found themselves in subprime loans in disproportionate numbers. The city of Baltimore’s suit against Wells Fargo, for instance, unearthed valuable discovery before it was settled last year as part of a larger deal with the other municipalities and the Justice Department.
Tony Pascal, who worked in Wells Fargo’s Baltimore branch, testified about the perverse incentives behind the numbers:
Because Wells Fargo made a higher profit on subprime loans, the company put “bounties “on minority borrowers. By this, I mean that loan officers received cash incentives to aggressively market subprime loans in minority communities. If a loan officer referred a borrower who should have qualified for a prime loan to a subprime loan, the loan officer would receive a bonus. Loan officers were able to do this because they had the discretion to decide which loan products to offer and to determine the interest rate and fees charged. Since the loan officer made more money when they charged higher interest rates and fees to borrowers, there was a great financial incentive to put as many minority borrowers as possible into subprime loans and to charge these borrowers higher rates and fees.
It’s been five years since Lehman, but as the book reminds us, this story is still unfolding.
(*Mortifyingly, I originally had the “e” before “i” in “Gottesdiener.” Sigh.)