Deposition of A Former Countrywide Employee Reveals A Broken Loan Review Process
The deposition of Glenn Hubbard has been making the rounds this week. If you have ever watched the documentary, Inside Job, then you may be familiar with Glenn Hubbard -- he is the one who tells of an interviewer saying, "This isn't a deposition."
It turns out that Mr. Hubbard was actually deposed as part of a rather massive lawsuit against Countrywide. I have barely had time to skim the 80-page document, but fortunately, Matt Tiabbi has had more time. Based on Tiabbi's writeup, it looks like the deposition yields some true gems.
In one line of questioning, Hubbard admits that he was paid $1,200 an hour by Countrywide to review loans. However, it would appear that this loan review did not involve reviewing the underwriting of the loan. For those who aren't familiar with how loans are issued, the underwriting process is where the bank verifies income and the overall creditworthiness of the borrower.
Hubbard was hired to review the loans as part of the litigation -- he was to issue an opinion regarding whether the loans were any worse than other loans issued by other banks. Keep in mind that the litigation involves allegations that Countrywide sold loans that it fraudulently guaranteed as good/performing loans. Those loans were then included in mortgage securities. Those securities failed. Miserably.
But Hubbard didn't review the documents that would prove whether the loans should have been issued in the first place. He states in the deposition that it was not necessary to do so. How he could have adequately reviewed the loans without looking at how the loans were issued is a mystery to me.
Hopefully, I will get a chance to review this deposition more thoroughly. From what I have read so far, it promises to be an entertaining read.