Countrywide loan underwriter found herself in ‘dangerous territory’

Introduction

After she lost her job in the fall of 2007, Cassandra Daniels had a word with a trio of her managers. As she recalls it, she told them she was praying that, someday, they’d learn to use their positions of power “to uplift your staff instead of destroying people.”

She cleaned out her desk and taped a handwritten sign to her computer screen, quoting one of her favorite gospel songs: “GIANTS DO FALL.”

That marked the end of Daniels’ tumultuous relationship with Countrywide Financial Corp., the nation’s largest home lender during the mortgage boom.

For Daniels, her four years as a loan underwriter inside Countrywide’s mortgage-production machine were a blur of 12- and 14-hour workdays and frequent clashes with managers and salespeople regarding loans she believed were tainted by fraud.

When she rejected loans that were based on inflated income statements or other questionable information, she says, management overruled her and pushed the deals through.

“The sad part is I lost hope in the integrity of any system,” Daniels recalled in an interview with iWatch News. “Because there were supposed to be checks and balances. But there weren’t. All these people were driven by pure greed. And they didn’t care that it was at the expense of other human beings.”

Bank of America Corp., which bought Countrywide in 2008, declined to comment on Daniels’ account of her time at the lender. However, a spokesman has dismissed the idea that Countrywide management encouraged fraud inside the company. When fraud happens, the spokesman said, “the lender is almost always a victim, even if the fraud is perpetrated by individual employees.”

‘Fast and sleazy’

Before she began working at a Countrywide branch in Chicago’s western suburbs in the summer of 2003, Daniels, a single mom, was working two jobs, as a manager at a local bank in Naperville, Ill., and as a night auditor at a Marriott hotel.

She thought going from two jobs to one was a good idea, especially with the prospect of earning $50,000 to $60,000 a year in salary and bonuses at a brand-name company that seemed to be growing bigger every day.

As an underwriter, Daniels was an important line of defense against fraud, vetting loan packages submitted by the sales department to see if they met Countrywide’s guidelines and whether the information on applications was truthful.

She says she got little training; before throwing her into the mix, her manager spent 2½ hours showing her how to underwrite Countrywide’s “Fast and Easy” loans, which required little or no documentation of borrowers’ income and assets, prompting some mortgage industry hands to dub them “Fast and Sleazy” loans.

Her branch was selling “Fast and Easy” loans and other mortgages so fast that Daniels and other underwriters had trouble keeping up. Daniels recalls tables stacked with pending loan files. Managers told her: “Just grab one and get it done.” There was no checkout procedure or safety measures to make sure no one walked out the door with a file full of sensitive financial data about loan applicants, she says.

“I wondered, ‘Where is all the security in this?’” she recalls.

The company expected her and other underwriters to get through eight to 12 loan packages a day. She’d get in early, work all morning and afternoon, then rush out to pick up her 3-year-old son at day care. She’d hit a drive-through restaurant window to pick up some food, and then head back to the office. Her son would fall asleep as she continued to work on files, sometimes as late as 11 p.m. or midnight.

The next day she’d do it all over again.

‘Making widgets’

She began tangling with managers and salespeople, she says, when she started rejecting loans that looked fishy. This earned her a derisive nickname from the sales staff: “The Decline Queen.”

Many of the disputed deals, Daniels claims, involved paperwork that listed questionable Social Security numbers or claimed applicants were making huge sums of money working in nail salons or running housecleaning or landscaping businesses.

She didn’t believe that the proprietor of a housecleaning business could be pulling in $100,000 or $120,000 a year. But when she asked for more documentation — such as copies of loan applicants’ tax returns — her managers scolded her, she says, telling her that, with “Fast and Easy” loans, such paperwork wasn’t necessary.

One borrower owned eight investment homes in the northern Chicago suburbs and had defaulted on local real-estate taxes owed against the properties, Daniels says. But Countrywide still approved a series of refinance deals that allowed the investor to suck hundreds of thousands of dollars in cash out of the properties.

“I realized I was in dangerous territory,” Daniels recalls. “I told my family: ‘You know what? The mortgage industry is nothing but legalized fraud.’”

In court records and in interviews, former employees say Countrywide executives cared little about fraud or whether borrowers could afford their loans. Most loans declined by underwriters would “come back to life” when new information supporting approval would “miraculously appear,” according to a former underwriter in Countrywide’s Jacksonville, Fla., loan-processing center who was cited as a “confidential witness” in shareholders’ litigation against the lender.

Brian Koss, who oversaw 54 loan branches in New England and upstate New York as a senior regional vice president, told Bloomberg Businessweek that company officials “approached making loans like making widgets, focusing on cost to produce and not risk or compliance. … The fiduciary responsibility of making sure whether the loan should truly be done was not as important as getting the deal done.”

To make matters worse, Daniels claims, management worked to quash investigations by her division’s internal fraud investigations unit.

At one meeting, she says, supervisors told workers they were making too many referrals to the investigations unit. The managers said that if anyone had suspicions about fraud, the matter should be referred to them, and they would decide whether it should be reported.

“They pretty much put a lid on it,” Daniels says.

Another former employee at Daniels’ branch agreed with Daniels’ assertion that management worked to paper over questionable loans and get them funded.

“There was a lot of fraud, I believe,” the former employee, who spoke on the condition her name not be used, told iWatch News. “It was all about getting the files out, making numbers for the month.”

iWatch News attempted to contact former managers at the branch but was not successful.

‘This is your last day’

Daniels acknowledges that no one ever directly threatened to fire her for reporting fraud, but says she “always felt like my job was in jeopardy. I never knew. It was uncomfortable.”

The end came in September 2007. The mortgage market was in a free fall, and Countrywide announced that it was sacking 10,000 to 12,000 workers across the country, slashing its 60,000-strong workforce by as much as 20 percent.

Managers called her into an office and told her: “This is your last day of employment at Countrywide.” She’s still not sure whether she was terminated or was included as part of the layoff, she says.

Within a few months, America’s home-loan giant had indeed fallen, gobbled up at a going-out-of-business-sale price by Bank of America.

Since she left Countrywide, Daniels has worked temporary jobs and done some consulting as a leadership development trainer. Even though she could use the money, she won’t go back into the mortgage business.

“I have no trust in the banking industry, period,” Daniels says. “All these major banks — they were major contributors to all this. They were all doing the same thing. I have no desire to be part of that.”