The New York Times, November 30, 2011
As a regional vice president for Chase Home Finance in southern Florida, James Theckston acknowledges that he and other bankers are mostly responsible for the country’s housing mess. Theckston shoveled money at home borrowers. In 2007, his team wrote $2 billion in mortgages. Theckston made several comments concerning mortgage loans made in 2007 and prior:
- Sometimes those were “no documentation” mortgages.
- On the application, you don’t put down a job ; you don’t show income; you don’t show assets. But you still get a nod.
- If you had some old bag lady walking down the street and she had a decent credit score, she got a loan.
- You’ve got somebody making $20,000 buying a $500,000 home, thinking that she’d flip it. That was crazy but the banks put programs together to make those kinds of loans.
- The bigwigs of the corporations knew this, but they figured we’re going to makes billions out of it, so who cares? The government is going to bail us out. And the problem loans will be out of there, maybe even overseas.
Theckston said that borrowers made harebrained decisions and exaggerated their resources but the bankers were far more culpable, and that all this was driven by pressure from the top. When mortgages were securitized and sold off to investors, senior bankers turned blind eye to shortcuts.
One memory particularly troubles Theckston. He stated, “that some account executives earned a commission seven times higher from prime loans, rather than prime mortgages. So they looked for less savvy borrowers — those with less education, without previous mortgage experience, or without fluent English — and nudged them toward subprime loans.” These less savvy borrowers paid a higher interest rate making them more likely to lose their homes.
In 2008, when the mortgage market collapsed, Theckston and most of his colleagues were laid off. He said he bears no animosity toward Chase, but thinks it’s unfair that troubled banks have been rescued while troubled homeowners have been evicted. The writer of this article, Nicholas D. Kristof stated, “When I called JPMorgan Chase for its side of the story, it didn’t deny the accounts of manic mortgage-writing. Its spokesmen acknowledged that banks had made huge mistakes and noted that Chase no longer writes subprime or no-document mortgages. It also said that it has offered homeowners four times as many mortgage modifications as homes it has foreclosed on.”
Comment: There are many issues here and most of us have read many articles concerning who’s at “fault” or who should be “blamed” for the mortgage mess. Many can share the blame: banks like Chase that issued the mortgages; Theckston, who was an “executive,” being a regional vice president, who now looks back on his participation but did nothing at the time; home owners who borrowed exceedingly more than their capacity to repay; opportunists who “flipped” mortgages; Fannie Mae and Freddie Mac who participated in pushing loans to unqualified participants, and our government who idly sat by and did nothing until after the fact.
By Roger Eigsti
Board President,
Institute for Business, Technology, and Ethics
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