Who Will Ombud The Ombudsman?

Clark Hoyt, ombudsman of the NY Times, goes into the tank for Edmund Andrews, author of "Busted", who was busted by Megan McArdle.

To recap - Edmund Andrews, Times financial reporter, is promoting a new book claiming to detail his personal journey through the dark underside of easy mortgages and financial distress.

The NY Times gave him space in the NY Times magazine to talk up his story and his book.  But missing from the story is any mention of the fact that his wife has filed for personal bankruptcy not once, but twice.  For a story about personal finances, that is a staggering omission, leading to some absurd phoniness in the Andrews tale.

However, Clark Hoyt addresses it this way:

Andrews is an excellent reporter who explains complex issues clearly. There are plenty of them to cover without assigning him to those that could directly affect whether he keeps his own house. He is too close to that story.

He can’t be too cautious. On Thursday, he came under attack from a blogger for The Atlantic for not mentioning in his book that his wife had twice filed for bankruptcy — the second time while they were married, though Andrews said it involved an old loan from a family member. He said he had wanted to spare his wife any more embarrassment. The blogger said the omission undercut Andrews’s story, but I think it was clear that he and his wife could not manage their finances, bankruptcies or no. Still, he should have revealed the second one, if only to head off the criticism.

Brad DeLong and Felix Salmon note that "the blogger" has a name, a lofty title (Business and Economics Editor of The Atlantic),  and a well-deserved reputation for diligence and accuracy.

Let me join the bashing with a frontal assault - there is no way the Andrews story can be read as an accurate, honest depiction of his experience.  This, for example, is from the NY Times magazine (my emphasis):

The only problem was money. Having separated from my wife of 21 years, who had physical custody of our sons, I was handing over $4,000 a month in alimony and child-support payments. That left me with take-home pay of $2,777, barely enough to make ends meet in a one-bedroom rental apartment. Patty [Andrews' new wife] had yet to even look for a job. At any other time in history, the idea of someone like me borrowing more than $400,000 would have seemed insane.

But this was unlike any other time in history. My real estate agent gave me the number of Bob Andrews, a loan officer at American Home Mortgage Corporation. Bob wasn’t related to me, and I had never heard of his company. “Bob can be very helpful,” my agent explained. “He specializes in unusual situations.”

Bob returned my call right away. “How big a mortgage do you think you’ll need?” he asked.

“My situation is a little complicated,” I warned. I told him about my child support and alimony payments and said I was banking on Patty to earn enough money to keep us afloat. Bob cut me off. “I specialize in challenges,” he said confidently.

...

Bob called back the next morning. “Your credit scores are almost perfect,” he said happily. “Based on your income, you can qualify for a mortgage of about $500,000.”

What about my alimony and child-support obligations? No need to mention them. What would happen when they saw the automatic withholdings in my paycheck? No need to show them. If I wanted to buy a house, Bob figured, it was my job to decide whether I could afford it. His job was to make it happen.

“I am here to enable dreams,” he explained to me long afterward. Bob’s view was that if I’d been unemployed for seven years and didn’t have a dime to my name but I wanted a house, he wouldn’t question my prudence. “Who am I to tell you that you shouldn’t do what you want to do? I am here to sell money and to help you do what you want to do. At the end of the day, it’s your signature on the mortgage — not mine.”

You had to admire this muscular logic. My lenders weren’t assuming that I was an angel. They were betting that a default would be more painful to me than to them. If I wanted to take a risk, for whatever reason, they were not going to second-guess me. What mattered more than anything, Bob explained, was a person’s credit record. History seemed to show that the most important predictor of whether people defaulted on their mortgages was their “FICO” score (named after the Fair Isaac Corporation, which developed the main rating system). If you always paid your debts on time before, the theory went, you would probably keep paying on time in the future.

So, Andrews told the mortgage broker that his wife's income would be important, but for some reason she was not included on the mortgage application, which (as best I can infer) was only in Andrew's name.  Why was she not part of the mortgage application?  Well, she had future prospects but no current income, so that would be a possible reason to omit her.  But surely there is a possibility that her previous bankruptcy would have been a huge disqualifying red flag.

Whether the mortgage broker knew of her previous bankruptcy is left as a mystery - it's hard to believe her credit score was perfect, so I infer that when Andrews claims to have been told that "Your credit scores are almost perfect" it means that he had more than one nearly perfect score.  Is that written to be intentionally deceptive?  Did the Times editors deliberately let that pass, or were they also in the dark as to the real story?  Who knows?  It's certainly not clear from the Hoyt defense or Andrews' response to McArdle that the Times editors were apprised of the situation.

So, is this a story of greedy mortgage brokers or nearly fraudulent mortgage applications?  I am pretty sure the latter tale would not be publishable, which would hardly suit Mr. Andrews current financial plan, which is to hit it rich with a best-seller, however phony.

Is this Mr. Hoyt's idea of full and fair reporting?  Knowing about the wife's prior bankruptcy makes reading this article even more challenging than doing a crossword puzzle, as the reader tries to figure out what Andrews is dancing around and what really went on.

I am sympathetic to the notion that in the current environment the NY Times wants to help out any of their reporters trying to make a buck on the side.  But I wonder at how much of their reputation and credibility they are prepared to invest in his venture.

Comments

[matt]

i used to love the character "Skink" in Hiassen's books before he went off the deep end (Hiassen, not the Skink, who was dead crazy anyway).

I bought the damned book before the news came out, and feel completely ripped off now. I was really hoping for some insight into the housing crisis, and instead got more NYT BS. Very disappointing.

[peter]

I liked Carl Hiassen's novels, too, despite the fact that his newspaper column is pure environmental pap.

And other than name calling, what evidence is there that Steve Sailer is a racist? Is everyone who recognizes that there are racial differences a racist

[Old Lurker]

Good Morning!

Drudge and WaPo are headling Obama's creation of an Internet Czar.

Anybody besides me getting tired of that word, with all of it's Russian roots, or with the fact that these Czars seem to acquire management power that circumvents the standing chains of command and cabinet appointments?

[Jane]

How long before the internet Czar encroaches on free speech - in the name of National Security of course!

[narciso]

Great, what could possibli go wrong there, that's not a typo, it's a reference to the Jurassic park parody of the Simpsons. An administration, whose most basic details of the candidates's background were shrounded in secrecy, which committed 'information warfare' against the most prominent of it's opponents, whose campaign financing was shrouded in secrecy and possible fraud, with
pretensions of omnipotence and omniscience;
there's nothing to be concerned about, Oh and "these are not the droids you're looking
for, move along'. Sounds like my endorsement
of Panetta some months ago, doesn't it.?

[AMac]

Hypothetical: You're a lawyer defending the bank in the civil case Houseowner versus Hometown Trust, and Ed Andrews is in the jury pool. With what's on the record about Andrews, is there a way you could allow him to be empanelled without being guilty of malpractice?

Ombudsman Hoyt admits that "Busted" is Andrews' hoped-for way out of his financial mess. The moral of the book is "homeowners like me--victims of greedy bankers." If the narrative falters, Andrews slides into ruin.

"No problem," avers Hoyt. "This guy's a perceptive gumshoe, fully qualified to report on the mortgage meltdown."

[fdcol63]

What's really ironic is that a Marxist wants to appoint a Czar! LOL

[AMac]

Steve Sailer, mentioned upthread, is among the most perceptive analysts of the real estate bubble. His post from 4/19/09, The Subprime Fiasco: "Predatory Lending" or "Predatory Securitizing?" is relevant to this story.

What hundreds of anecdotal accounts show is a process often involving collusion between the borrower and the originator of subprime mortgages to defraud institutions farther up the financial food chain by selling them garbage.

We had a ridiculous system in which big investors let themselves get duped by small grifters. The borrower 100% knew he wasn't making the $132,000 per year he put down on his mortgage application. The mortgage broker was 95% sure the stated income figure was a lie. The storefront mortgage broker's boss was 90% sure. The loan officer at Countrywide who bought the loan from the storefront mortage sales firm was 75% sure. The Countrywide salesman who securitized it into mortgage-backed security and sold it to Fannie Mae was 50% sure, while the Fannie Mae buyer was 25% sure, while his boss was 10% sure...

[Neo]

But imagine if you were the reporter and editor who had the Watergate scandal land on your lap - handed to you by the acting direcor of the FBI no less - in 1972 and you did, well, pretty much nothing. Nearly 37 years later, the New York Times has the sorry story here of how two of its staff, reporter Robert M. Smith and editor Robert H. Phelps, let the Watergate story go.

[bad]

Does the blue-tounged skink also have big blue balls?

[Captain Hate]

What's really ironic is that a Marxist wants to appoint a Czar!

I'm currently contemplating to whom that will be communicated.

[Old Lurker]

My thought exactly, fdcol!

Upon reflection I conclude his knowledge of history is so thin that the irony escapes him.

[A.W.]

Actually there is a reason why the bank wouldn't ask about his wife's credit rating: they aren't allowed to. There is a law called the equal credit opportunity act (ECOA), which bans discrimination in lending based on gender or marital status. and numerous cases back up the proposition that this means that they can't ask about your spouse's credit history, becuase they wouldn't be asking that unless you were married. But that would contribute to the story, too, showing how in that individual case, the law force the bank to be blind to a serious potential risk factor.

There is no way to escape the fact that the story is pretty deceptive without mentioning the wife. he can defend that fact, show why it doesn't dilute his story, but it should be said.

Btw, in a joyful turn of events, the FTC is pushing an interpretation of that statute and several others (including laws that require creditors to check for identity theft) that would declare any person who recieves any delayed payment at all, to be creditors who are covered under the statute. Yes, anyone with any delay at all. that means floor moppers in a supermarket. That means i assume 90% of the workforce.

Don't believe me. read the letter here: http://www.ftc.gov/os/statutes/redflags.pdf

Then read the underlying statutes. The author is talking about businesses only, but the statute actually says "persons"--which includes most businesses, of course, but also actual human beings. They have delayed enforcement until august, but bluntly, you guys should consider calling your congressmen to get this agency back under control. Until recently the courts have said that a monthly billing approach did not make you a creditor. the FTC is trying to overthrow that approach.

[Danube of Thought]

'Morning to you all.

Less than twenty-four hours ago I announced that O's "strongly approve" number probably couldn't go below the 33% it hit yesterday.

So I am proud to announce that today it is a 31%, with 30% strongly disapproving. Overall approval is at 54%, which I believe ties his all-time low.

Does this mean anything, or is it noise?

Which Republican on the Judiciary Committee will vote for Sotomayor? Now that Specter's gone, my money is on Hatch. Guy makes me sick.

[Danube of Thought]

Well, well. We seem to have a pretty sharp conflict between "Anon" at 01:53 a.m. and A.W., above, on whether the wife's finances would have been disclosed.

Anyone inclined to referee?

[Old Lurker]

What it means is I am moving from dislike, through strongly dislike, to hate.

Which is unchristian of me I know, but there you have it.

His proforma Memorial Day comments followed by hitting the links while N Korea lights off a nuc, before nominating a whack job to the court sums up a good 24 hours for the Won.

[Danube of Thought]

The seven GOP committee members are Sessions, Kyl, Cornyn, Coburn, Hatch, Grassley and Graham.

I would think the first four are reliable "no" votes, while the final three aren't reliable on anything at all.

But it would be delightful if the committee rule providing that at least one Republican must vote "yes" in order to get a floor vote were to nix the nomination because Specter no longer counts.

[Old Lurker]

Those night owls are often productive in the wee hours. Rich, Rick and Po done good on eco issues on the other thread.

[Danube of Thought]

Hatch was one of seven GOP Senators--the only one now on Judiciary--who voted "yes" on her Court of Appeal confirmation.

[Old Lurker]

DoT, care to get riled up about the WH banning of swords at the USNA graduation last week?

[jean]

OL I couldn't figure the ban on swords out.Did the WH think all the grads were going to charge the stage?Could they be that paranoid?

[Old Lurker]

He's a tone deaf idiot, Jean.

[jean]

Did anyone see the article at Directorblue about the Chrysler dealerships that were shut down and their political donations?

[fdcol63]

I hope the majority of them were Obama supporters.

Share the pain of Hope and Change!

[laura]

Are the swords always worn at graduation? If so it seems to me not only is Obama tone deaf, he has decided to make a stand against tradition and honor of one of his country's greatest institutions. Just one more reason for me to travel further down the road of ODS.

[jean]

No they were R donors. directorblue.blogspot.com/ I'm sorry I don't know how to do link thing.You need to scroll down to find the article

[Rick Ballard]

DoT,

I read AW's post as an explanation of the legal basis for Anon's observation that (3)The broker pulled credit on both husband and wife, had a discussion that they keep the wife off the loan because her credit hurts the ability to qualify, husband and wife enthusiastically agree to all the terms.

The broker used the law cited by AW as a shield to hide the defective credit of the wife from the lender with husband and wife agreeing to the strategy.

As an aside - I disagree that the husband was fishing when he caught the wife. He's the bottom feeding sucker who wound up with a very large hook in his gullet in this amorality play. An hour's reflection upon Proverbs might have provided him the ounce of cautionary prevention necessary to stay out of BK.

[jean]

Redstate seems to have picked up on the dealership closings .Hopefully if true the MSM will take notice

[GMax]

I am currently refinancing my home due to the low interest rates. I discussed both my and my wife's finances with the mortgage broker. His advice was to not include my wife salary on the application as we did not need it to qualify, as it would cause potential problems in that she had been employed less than 2 years ( came back out of self employed motherhood!).

Its not hard to reconcile the two statements whatsoever. The lender and ultimately FNMA which buys about 70% of all mortgages, will know nothing of here employment. While this is not the negative that a BK is, its still the same concept. Lender will make the lending decision without knowing this fact.

[clarice]

A very useful piece--and now we can see why Jane is doing so well. It's how she works:

http://www.americanthinker.com/2009/05/how_to_talk_to_a_liberal_if_yo.html

[Fresh Air]

...whose campaign financing was shrouded in secrecy and possible certain fraud, with pretensions delusions of omnipotence and omniscience...

A couple of small edits for you.

[A.W.]

Regarding the conflict with anon, typically the broker is not the creditor in that respect, so not covered. but it is absolutely the law. I had to look into it to determine the impact of that new letter on my company.

Banks giving out mortgages are always covered. up until recently it seemed pretty settled that billing monthly didn't count, until the FTC upturned the whole apple cart. if you look under the hood, this administratioin is shaping up to be pretty scary for businesses. they act like no one knows a recession is going on.

[Enlightened]

Woah - Gay Marriage Ban Upheld in CA -

[in_awe]

What's your point? That Andrews wrote an article about his foolishness, but he left out some of his foolishness? This is what writing is all about. It's about making choices. If he had included the details you want included, the story would not have changed a bit.

Right, adding the insight that "my wife and I deliberately gamed the system, defrauded the lender, and violated FEDERAL LAW by withholding substantitive, pertinent information from the loan application in order to mislead the lender as to our ability to properly handle a $500,000 mortgage" wouldn't change the tone or tenor of the story at all.

The borrowers and the broker/loan officer should all be prosecuted for their criminal behavior. Assessing someone's financial status also includes examining one's demonstrated behaviors handling prior obligations. Filing bankruptcy certainly speaks to one's ability AND intent to repay. To file twice removes any doubt about one's judgement in undertaking financial obligations and commitment to repay them if times get tough.

Ok, you say - but the wife wasn't a co-applicant on the loan so technically they didn't violate the law. But once Bob Andrews was apprised of the limited financial resources of the sole borrower, the law prevents him from using a liar's loan as an alternative. When he learned that Edmund Andrews had $2777 in discretionary after-tax income he knew that he was not qualified for the size loan being requested. He was prohibited from pretending that he never heard that and shifting to a no verification loan. Sure it happened all the time, but it was illegal to do so!

With all the forgiveness of the Obama mortgage bailout programs, I wish that there were rules that said if you lied or withheld substantive information on your application for the loan you are permanently excluded from receiving a rescue using taxpayer money. If it was a No Income/No Asset (NINA) application, demand evidence of income from the date of the application and see if the person would have qualified. Let's clear the scene of all the people blaming lenders for their own dishonesty. They did it to themselves, but want MY money to bail them out?! .If they were complicit in the fraud - screw 'em.

[narciso]

Thanks Fresh, that was a quick comment. So he chose the most extreme of the nominees,
well good, more of a clarifying choice, bad
for the country; but they wanted change, so
brother are they getting change.

More painful than any root canal, is the publications available at the dentist' office. One with Obama's countenance,(Newsweek)and the other one with Michelle.
One 'interview' was straight dictation, with apparently no rebuttal, on the question
of Gitmo, Cheney's policy stance, other weighty issues. There isv't enough straw in all of Kansas. The second has jihadilifeline
Bobby "Aparism" Ghosh miming Taliban and AQ talking points. On balance, I have to give
the worst impression to Time, but only by a nose.

[narciso]

Oh and it's a might crisp in hell, today as Dave Brooks has an amusing column for once,
well that was the spirit in which Orrin Judd
offered it.

[narciso]

Here's the Brooks piece, one can't actually tell if he's kidding or being serious,

[clarice]

in_awe:"With all the forgiveness of the Obama mortgage bailout programs, I wish that there were rules that said if you lied or withheld substantive information on your application for the loan you are permanently excluded from receiving a rescue using taxpayer money. If it was a No Income/No Asset (NINA) application, demand evidence of income from the date of the application and see if the person would have qualified. Let's clear the scene of all the people blaming lenders for their own dishonesty. They did it to themselves, but want MY money to bail them out?! .If they were complicit in the fraud - screw 'em.
"

Sounds perfectly sensible to me.

Enlighted--they DID?

[Jane]

A very useful piece--and now we can see why Jane is doing so well. It's how she works:

Clarice,

That is a very nice complement, thank you. Not much of a contest these days as both Dick and Peter appear to have changed their stripes.

[narciso]

Ok I read the Scotusblog summary on Sotomayor, and she seems all over the board, certainly bad in some areas like environmental law and employment discrimination but worse than Souter. For
a former Marshall clerk, I expected worse

[fdcol63]

“I would hope that a wise white male with the richness of his experiences would more often than not reach a better conclusion than a female Latina who hasn’t lived that life,” said Judge Sotomayor, who is now considered to be near the top of President Obama’s list of potential Supreme Court nominees.

How did that sound?

Oh, wait. She juxtaposed the "white male" and "female Latina" references in her actual quote.

I guess it's okay then.

[GMax]

If the wife did not sign the application and was an an applicant, she did not violate the law and cant be punished.

I would like the side of the story from Bob Andrews, and doubt we will see it though for various reasons.

But any fool who has less than $3000 a month of disposable income and borrows in the $400K range is not a person who should be allowed another opportunity to borrow. The interest on that amount alone will be close to $2000, leaving just enough for cab fares and train fares in Manhatten, if they swear off all meals for the year.

A true idiot savant, was his plan to win the lottery or was he going to flip the house in six month for a large profit? Either way it was a fool's bet and no one should buy the fool book retailing that fact.

[Rick Ballard]

OT. Sorta.

GM's secured creditors have adopted a reasonable stand towards Obamunism and the Obamunists:

the source said the company had only "low-single-digit" interest from bondholders.

I join with the bondholders in manifesting a single digit 'Salute to the Obama Administration' today and every day.

[clarice]

Ah--Shall we play guess which finger they were holdimg up?

[Ralph L]

IIRC, in Virginia, spouses were automatically put on property deeds and thus had to sign and be included in mortgages.