"They're B-a-a-a-c-k . . ."

Return of the Sub-Prime Lenders

One of the surprises -- at least to me -- wading through all the foreclosures in Minneapolis neighborhoods like Phillips, Camden, and Powderhorn Park is the identity of the banks who now have title (i.e., they're the owners).

It's a veritable "who's who" of the most aggressive -- and least ethical -- subprime lenders: entities like Countrywide, Indymac, Washington Mutual, etc.

At least to my knowledge, none of these lenders had a major presence in the Twin Cities at the peak of the market. Of course, today they're folded into other banks that bought them at fire sale prices after they collapsed or outright failed.

So what gives?

The explanation has to do with how the mortgage market works.

Borrowers can either apply for a mortgage directly from a lender, or, go through a broker who does the shopping for them in exchange for a commission.

Guess which lenders dangled the fattest commissions in front of Twin Cities brokers (and presumably, mortgage brokers nationally) when the market was frothiest??

Unfortunately, as far as the subprime lenders are concerned, it's not so much that "they're b-a-a-a-c-k," as, "they never really went away."