The Mortgage Insider

For Release: February 5, 2008

 

A former subprime lender is trying to fix the mortgage industry. In his new book, Greed, Fraud & Ignorance: A Subprime Insider’s Look at the Mortgage Collapse, Richard Bitner provides a detailed account on the lending activities that caused the mortgage industry to implode. He believes the current housing crisis is more complex than most people realize.

“The public deserves to know the unabridged version of what happened,” said Bitner. “The first step to fixing the problem starts by understanding the root causes.”

By chronicling the five-year history of his subprime mortgage company, Bitner examines every segment of the lending industry. Although he feels the blame is widespread, he points to fraud as one of the main reasons the industry failed. “In my experience, seven out of every ten subprime mortgage loans originated by brokers were fraudulent. The level of deception was beyond comparison,” said Bitner.

While stated income loans have received extensive media coverage, Bitner explains that the loan approval process was filled with holes. “Since every loan was a challenge because of credit issues, the industry developed techniques to help unqualified borrowers secure financing.  As competition increased, the definition of what constituted a good risk became blurred.”

Bitner sold his company more than one year before the industry imploded, believing the business was no longer serving the greater good. When the problems started to impact the entire industry last August, he decided to share his experiences in the hope of developing a solution.

“The key to fixing the problem,” says Bitner, “is through a comprehensive strategy that addresses each of the industry layers. There has to be a balance between protecting the consumer and not restricting the availability of credit. At a time when lending guidelines are getting tighter and the market is contracting, we can’t afford to pass any legislation that makes it more difficult to get a loan.” 

Bitner proposes a broad list of recommendations that cover every segment of the mortgage industry. Although he believes the current bill passed in the House of Representatives is a good start, he feels it falls short in several areas. “I’m concerned that the biggest contributor to the problem is being ignored,” said Bitner. “The rating agencies fooled investors into believing these mortgages were safe. Until Congress is willing to address the root cause of this problem, any solution they implement will only serve as a band-aid.”

Richard Bitner is a 14-year veteran of the mortgage industry, having served as President/Owner of Kellner Mortgage Investments, a Dallas-based subprime wholesale lender.  In addition to working for GMAC Residential Funding and GE Capital Mortgage Insurance, he is a well-respected mortgage industry speaker and author. He currently serves as the President of LTV Media.