Thursday, June 19, 2008
Victim or Co-Conspirator?
"In a ruling that backs borrowers even when they have lied on loan applications, a federal bankruptcy judge held that borrowers who inflated their income to get a loan don't have to pay back a bank because the lender should have noticed a 'red flag' about the deceit. ... Inaccuracies in loan documents have emerged as a factor behind the wave of foreclosure and banckruptcy actions. The Oakland case highlights a debate that has emerged over whether responsibility for homeowner's woes should fall to lenders or borrowers", WSJ, 31 May 2008.
Why is National City Bank (NCC), see my 18 June 2008 post, surprised? Do we really know what went on here? Did NCC expect to sell the mortgage in the market, then got stuck with it, which might explain NCC's failure to investigate the borrower's financial bona fides?