State, federal officials targeting mortgage lenders

A long list of state and federal officials are investigating mortgage companies across the country, trying to puzzle out their role in the housing crisis and the record number of foreclosures hitting U.S. homeowners.

You can read here about some of these in this RealEstateJournal story by writer Ruth Simon. Many of the investigations center around whether large mortgage lenders — Countrywide and Wells Fargo have been both targeted — have improperly put minority home buyers into high-cost subprime mortgage loans when these customers could have qualified for lower-cost traditional ones.

This is a serious issue. For years during the housing boom, mortgage lenders relied on subprime loans to generate serious cash. Now the question is whether many of these loans were even necessary. Subprime loans are supposed to be given to borrowers with bad credit or sketchy income histories. They’re risky loans, which is why they come with more fees.

If mortgage companies have been giving them out to borrowers who just as easily could have taken out traditional mortgage loans with lower fees and interest rates, that’s a serious indictment of the mortgage-lending business.

We’ll have to wait as the cases unfold before passing final judgment. But unfortunately, as we’ve all seen during the current housing slump, it’s getting harder to give real estate and mortgage professionals the benefit of the doubt.