Who’s to blame? Is it the guy with 70 houses? The cash-flow-happy mortgage brokers? Alan Greenspan? Yes, yes and yes.
Others are dealing with legal fallout. NovaStar Financial settled a class-action suit in Washington state on June 27, paying $5 million to some 1,600 borrowers who contended that NovaStar hid loan fees. Locally, $14.23 million in NovaStar loans failed between Jan. 1 and July 1. Half defaulted within seven months of being written. In March, the Federal Deposit Insurance Corp.
found that Fremont Investment Loan of Brea, Calif., and its related corporations unlawfully sold mortgages with features making defaults more likely. In Palm Beach County, $15.3 million in Fremont mortgages defaulted within the first six months of this year.