Kevin Stein, associate director of San Francisco's California Reinvestment
Coalition, told the commission that federal regulators here knew -- at least since 2006 -- that many of these loans were fraudulent and unpayable.
was this dynamic more clearly on display than in the summer of 2006
when the Federal Reserve convened hearings in San Francisco," he said. "Consumers testified to being sold option ARM loans in their
language, only to be pressured to sign English-only documents with
So blatant were these fraudulent lending practices that, in some cases, loan papers were worthless the moment they were issued, according to the Commission's 662-page report.
"Some consumers testified to being unable to make even their initial
payments because they had been lied to so completely by their
brokers," Stein told the commission.
Stein's organization tried to warn regulators early on, the report said.
The California Reinvestment Coalition, a nonprofit housing group based in Northern California, also begged regulators to act, CRC officials told the Commission. The nonprofit group had reviewed the loans of 125 borrowers and discovered that many individuals were being placed into high-cost loans when they qualified for better mortgages and that many had been misled about the terms of their loans.
Mona Tawatao, an attorney with Legal Services of Northern California, said mortgage fraudsters often preyed on the most helpless people.
She told the Commission that typical victims included
"...people who got steered or defrauded into entering option ARMs with teaser rates or pick-a-pay loans, forcing them to pay into pay loans that they could never pay off. Prevalent among these clients are seniors, people of color, people with disabilities, and limited English speakers, and seniors who are African American and Latino."
In 2006, Tawatao and Stein were defending poor people who'd been victimized by shysters -- not exactly big news. Now, that we know those fraudulent schemes were behind an economic collapse that hurt rich and poor alike, their testimony is front-page material.