'If you had a pulse, we gave you a loan'

Pointing the finger
Pressed as to how the loan application could include inaccurate and inflated income information, Taylor acknowledged she didn’t really look closely at the loan documents and said she never noticed the amount until NBC News pointed it out to her.  She denied knowingly submitting false information and pointed the finger at Countrywide: “It had to be them in order to finagle the numbers to say that I could afford this property.”

What she may not have realized is that she was issued so-called stated income loans, where the lender did not verify actual income.  Borrowers liked them because they made it much easier to qualify, and lenders loved them because they could charge higher interest.

As a result, stated income mortgages became extremely popular during the height of the boom. In 2006, for instance, the year Taylor got her loans, subprime lenders issued an estimated $265 billion in stated income mortgages, according to data supplied by First American CoreLogic and the trade publication Inside Mortgage Finance.

To highlight just how simple it could be to borrow money, Countrywide marketed one of its stated-income products as the "Fast and Easy loan." 

As manager of Countrywide’s office in Alaska, Kourosh Partow pushed Fast and Easy loans and became one of the company’s top producers.

He said the loans were “an invitation to lie” because there was so little scrutiny of lenders.  “We told them the income that you are giving us will not be verified.  The asset that you are stating will not be verified.” 

He said they joked about it: “If you had a pulse, we gave you a loan.  If you fog the mirror, give you a loan.”

But it turned out to be no laughing matter for Partow. Countrywide fired him for processing so-called “liar loans” and federal prosecutors charged him with crimes. On April 20, 2007, he pleaded guilty to two counts of wire fraud involving loans to a real estate speculator; he spent 18 months in prison.

In an interview shortly after he completed his sentence, Partow said that the practice of pushing through loans with false information was common and was known by top company officials.  “It’s impossible they didn’t know.”

A rogue manager?
During the criminal proceedings in federal court, Countrywide executives portrayed Partow as a rogue who violated company standards.

But former senior account executive Bob Feinberg, who was with the company for 12 years, said the problem was not isolated.  “I don’t buy the rogue.  I think it was infested.”

He lamented the decline of what he saw as a great place to work, suggesting a push to be number one in the business led Countrywide astray.  He blamed Angelo Mozilo, a man he long admired, for taking the company down the wrong path.  It was not just the matter of stated income loans, said Feinberg.  Countrywide also became a purveyor of loans that many consumer experts contend were a bad deal for borrowers, with low introductory interest rates that later could skyrocket.

In many instances, Feinberg said, that meant borrowers were getting loans that were “guaranteed to fail.”

Paula Taylor’s primary loan was set to adjust in two years. 

Video   Paula Taylor's story Paula Taylor is a personal trainer in Boston. Like many Americans, her dream was to own her own home, but could she really afford it? Hear more in this web-exclusive video. Dateline NBC

She claimed the loan officer told her not to worry, that if she made her mortgage payments on time for a year or so, she would be able to refinance at a better rate.

She knew she could not really afford the place on her own, she said.  She invited her sister to move and pay rent.  But Taylor’s sister did not stay long.

Taylor defaulted in only seven months. 

In retrospect, she was willing to blame herself “a little bit,” but put most of the onus on Countrywide. “Why would they tell me as the lender that I can afford this,” she asked,  “if they know they're not going to get their money back?”

With foreclosure rates at an all-time high, it is a reasonable question.  Equally reasonable is why so many borrowers did not heed common sense and pay closer attention to the terms and conditions of their loans.

In Michigan, Linda Johnson acknowledges with regret that she failed to read her mortgage papers. A retired school principal, she lived in the same comfortable brick home for 26 years.  When her daughter was accepted at an Ivy League college, Johnson decided to refinance and take out cash from the new, bigger mortgage to help pay tuition.

She thought she was getting a fixed rate mortgage, she said, but because she did not look closely at her loan papers, she did not realize her interest rate was going to climb to nearly 12 percent.

Video   Linda Johnson's story Linda Johnson is a retired school principal, who has lived in her Michigan house for 26 years. Listen to her story in this web-exclusive video. Dateline NBC

When the rate adjusted, she had a hard time keeping up with payments and ended up borrowing money from her pension fund.  “I’m tapped,” she said.

She was recently able to work out a deal with her lender for a lower interest rate.

David Carbajal was not as fortunate. A gardener in Orange County, Calif., Carbajal had taken on a $600,000 mortgage, with payments adding up to more than $60,000 a year, substantially more than the $50,000 a year he said he earns.  He had no real explanation as to why he never did the math to figure out that the house was beyond his means, though he was able to afford for a time because he rented a room to a friend.  Not surprisingly, Carbajal ended up in foreclosure.  Recently, he and his family were forced to move out.

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