"Confessions of a Sub-Prime Mortgage Baron"

From The Guardian's interview with Richard Bitner, "co-founder and president of Kellner Mortgage Investments, a firm which specialised in providing high-risk loans:"

As a sub-prime mortgage lender, Richard Bitner has not done too badly. He lives in a huge mock Tudor house in a wooded suburb on the edge of Dallas, complete with miniature turrets, an oversize fireplace and wood-panelling... Now out of the game, he compares himself to a drug dealer, acknowledging that his trade has achieved pariah status in the public eye.

... Dishonesty became endemic in loan applications. By the end, Bitner reckons that 70% of submissions to the company from brokers were deceptive. Properties, supposedly objectively appraised, were spectacularly overvalued. He estimates that half of loans were on homes over-egged by up to 10%, a quarter had prices exaggerated by 11% to 20% and the rest were "so overvalued they defied all logic".

"The industry lost its mind," says Bitner. "It went from borderline stupid to downright insane." The notion of "acceptable risk" simply went out of the window: "I watched the margins compress in the industry and I realised no one was providing for the risks."

In his book, Bitner recounts a seemingly endless list of tricks used by brokers to push dubious loans. Many simply withheld information, such as the fact that a homebuyer was getting an additional loan to pay for a deposit or that a couple, buying on the basis of joint income, were actually planning to divorce. Others would manipulate figures by knocking up ersatz payslips using desktop publishing programs.

...As a sub-prime lender, Bitner accepts that he was far from blameless. He was, at times, knowingly marketing unrealistic loans. Bitner viewed one common product, providing 95% finance to people with ultra-low credit scores, as "absurd". But he defends the principle of sub-prime lending and maintains that in his five years he did more good than harm.

- Garry J. Wise, Toronto

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