Subprime lenders got a lot more blame for the housing market crash than did government policies.
Subprime lenders were the bad guys! They lent to people who were bad credit risks.
What is subprime lending? It is lending to people who don’t conform to the standards set by Fannie Mae and Freddie Mac. People who are not an ideal credit risk. As a result, they have to pay higher interest rates and higher fees than a conforming borrower.
PacWest Funding’s CEO watched in late 2007 as rival mortgage brokerages, banks and collaborators collapsed under the weight of the declining housing market.
Fearing his company would be next, Curtis Melone restructured his business to offer what he felt people needed most: help with their crushing mortgage debt.
Melone re-christened his company Green Credit Solutions, a loan modification firm dedicated to aiding people facing rapidly ballooning payments on loans many of them couldn’t afford in the first place.
The journey from subprime-era lender into purported troubled homeowners’ helper has been a common post-meltdown path in the mortgage industry hotbed of Southern California.
Loan brokers put out of work by the housing market collapse went looking for the next big thing — and found it in the mortgage modification business, which provided a way of cashing in on the problems they helped create.
Many of those firms, including Green Credit Solutions, have been shut down and are now facing state and federal investigations trying to prove that they bilked their customers.