Execs Offer Subprime Defense Mechanisms

By Shenn, Jody | American Banker, November 21, 2005 | Go to article overview

Execs Offer Subprime Defense Mechanisms


Shenn, Jody, American Banker


MIAMI -- A CitiFinancial Mortgage executive advised other subprime lenders to focus on "defense" as much as "offense" and noted that nine of the industry's top ten players from 1997 are no longer around.

In his keynote address last week at a subprime lending conference here, Richard Kile said an explosion of interest-only loans, other risky underwriting practices, and a heavy reliance on California originations are just a few of the reasons for lenders to ask themselves, "Am I doing everything I need to do to have a business that lasts?"

Mr. Kile, the Citigroup Inc. unit's executive vice president of mortgage banking, warned that reputation risk is "a far larger risk than monetary damage, fraud, or regulatory penalties."

One of his main suggestions was to get involved in the National Home Equity Mortgage Association's BorrowerSmart education campaign, which is sponsored by several lenders, including Accredited Home Lenders Inc., Countrywide Financial Corp., Saxon Capital Corp., HSBC Holdings PLC, and New Century Financial Corp.

Besides helping borrowers make educated loan choices, the campaign is "the first significant thing the industry has done as a whole to be proactive" in response to "charges of persistent predatory lending," he said.

When making forecasts, "I think as an industry we need to do a better job" of keeping an eye on factors that might lead to weaker home prices or higher interest rates, Mr. Kile said.

He also advised subprime lenders to make sure they have "the right people with the right job descriptions" in each department. "It's not good to have somebody good at sales and marketing run your risk department. It happens, people, too many times."

Mr. Kile suggested debt-to-income ratio ceilings of 55% for no- or low-down-payment subprime loans with a fixed rate and 50% for those with an adjustable rate. He also urged originators to pay attention to "reasonableness" tests required by investors on stated-income loans.

SourceMedia Inc., the parent company of American Banker, organized the conference.

Tom Benz, a senior vice president at HSBC Bank and the head of asset risk management for mortgage- and asset-backed securities, said assessing reasonableness means looking at whether a borrower can carry a certain debt load. He cited the case of a loan applicant who claims to have enough income to support a $3,000 monthly payment but most recently was spending only $700 a month and has no assets in the bank. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Execs Offer Subprime Defense Mechanisms
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.