News Home | Loan Modification News | Short Sale News | Bankruptcy News

Foreclosure News | Government | Mortgage Servicers & Lender News

Major U.S. Banks Funded Subprime Lending

Major U.S. banks may be to blame for the sub-prime lending crisis for which they are now getting billions of dollars in aid. A study released this week shows that more than 20 sub-prime lenders, who fueled the housing boom from 2002 to 2006, were funded in large part by American mega-banks.

Most of these lenders no longer exist, having gone bankrupt or been acquired by larger financial institutions early in the housing crisis. The parent companies and affiliates of these lenders have since tapped around $700 billion in government assistance.

The Center for Public Integrity, an investigative research firm, believes that the financial collapse was not unforeseen. Executive director Bill Buzenberg says that the banks were “deliberate enablers” for the sub-prime lending that poisoned the U.S. and global financial markets.

A key example is the sub-prime lender New Century Financial Corp., whose high-cost lending schemes brought in more than $75 billion from 2005 to 2007. Research showed that the company was by the major banks Bank of America, Morgan Stanley, and Goldman Sachs. The latter two have so far received $10 billion each from Congress, while the former recently got a $25 billion bailout.

The CPI aims to make the report a primer for better understanding the cause of the current crisis.

 

Earlier in Mortgage Servicers & Lender News:
Citigroup Joins Second Mortgage Modification Program
Seven Banks Shut Down; U.S. Total Now 37
What Is A Point According To Mortgage Terms?

Loan Modification Case Studies