Having been in the wholesale end of the business with Option Arms as one of my products, 99% of the time the loan officer would ask for “max prepay, max rebate”. (mortgage lingo = I want to make the most money I can on this loan and how much can I screw the borrower within law to satisfy my greed)
Seldom was there any concern for providing the borrower with a shorter prepay period because that would reduce the rebate. With a 3 year prepay rebates were typically around 3%. However one lender who did a ton of OA’s offered 4+% and another for a short time 5%. Also if they could sell it the LO’s would charge points on the front.
The only thing LO’s cared about was the large commission.
They did not understand the product themselves so no way could they educate the borrower, nor did they want to. They sold the minimum payment and borrowers eagerly took the bait.
On one occasion I was talking with a competitor and he mentioned his company had paid a broker $100K in commission for one loan. Obviously a large loan amount and you can bet there was a 3 year prepay.
I fail to comprehend how a single residential mortgage is worth $100K in commission.
I do want to qualify this in saying I have to take his word for it as I certainly never saw any documentation but I can see how it would be entirely possible.
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The only thing LO’s cared about was the large commission.
Wow DJ, Now multiply that by millions of loans and realtor sold homes and the bubble as we know it, inflated by commissions, beemers, gucci bags and sushi lunches.
Plus all the other normal foreclosure factors…………….
the rest of the story:
the lenders who offered these loans added fuel to the fire by emailing Loan officers a teaser product sheet: (ie) a loan product flyer.
the lender would tease the loan officers by stating at 2.25 margin you will receive 1pt rebate, this continued; as the margin went up so did the rebate all the way upto 4pts. (this situation was fueled from many levels; i believe that all pieces of the puzzle have to take some ownership in this nightmare. lenders, realtors, consumers, wall street and the gov’t.
this not just a mortgage broker creation, many of Realtor/lenders, bank loan officers, credit union loan officers and you name it. (if you had the authority to lend money you could either run with the pack or standup to the crowd like i have on many occassion to the Real Estate community and inform them of the nightmare they are creating. this was never received well, usually poo pooed. only today do people remember back and remember my words.. we need more people to stand up and fight for the consumer (ie Moe and Brian).
thanks for creating a great forum. i pray that many of consumers will be guided and directed out of this nightmare.
i also, pray that the federal gov’t will force all loan officers to become licensed and regulated;unlike it is today in California and many other states. (the banks and some brokerages are not licensed – the dept of corp regulates them, along with all the corportions )
example: if you were a loan officer with Ameriquest (we all know aout them) and after they shut down the retail division for the numerious lending issues you could leave one day and tomorrow open up your own mortgage brokerage without licensed loan officers, then you could contact Argent wholesale (Ameriquest wholesale division) and request a line of credit for your company.. now you have unlicensed mortgage bankers carrying out the same @#$%^ that Ameriquest taught them.
Banks and DOC (dept of Corp) brokers did not have to disclose their rebates to consumers b/c of their regulators did not require them to..
Banks will fight this tooth and nail not to disclose to the consumer their rebates they make on any loan. We Dept of Real Estate licensed and regulated Loan officer are required to disclose every penny.. i know; a lot of bad actors did not and will not; these are the people we need to send packing.
I know there are a lot of great honest people in the mortgage and real estate industry, but it only takes a few bad actors to bring an entire industry down. (dont throw out the baby with the bath water)
the Nat’l Assoc of Mortgage Brokers is fighting to have all loan originators licensed no matter if you work for a bank, brokerage, credit union or real estate company; this is needed for many reasons: one) “flight risk” meaning if someone loses their ability to lend in one state they should not be freely able to go to another state and start fresh.
we also need consequences for action and the threat of someone will do something about the bad actors.
the sad part about this story is that big corporation are still selling option arms on a national level even after this “eye opening” disaster. i find it also sad that the big boys still think that consumers are stupid enough to believe their lies and continue as nothing has happen.
Welcome to the “Its all about me” club..
Moe keep up the great work and expose all the “bad actors” and their contribitors. (the wall street journal had a great article last week about all the political capital that Ameriquest spread all over Washington – this is no longer a Jimmy Stewart (wonderful life) type of industry any more.
Hopefully everyone will learn and educate each other that the “if it seems to be too good to be true; it probably is” theory. we all need to watch out for each other and speak up and stand up against the bad actors in every industry.
God Bless America
IF we stand up for each other, awe can make great changes. History has taught us this lesson over and over
” i find it also sad that the big boys still think that consumers are stupid enough to believe their lies and continue as nothing has happen.
Welcome to the “Its all about me” club..”
But it’s true, as long as consumers remain uneducated they are prey. The book that Countrywide sent out with their loan (I received it AT closing by the way, not before, with the GFE) it’s got more than 40 loans in it, and the language is Greek to me — imagine an elderly couple, a couple who has English as their second language, someone who doesn’t have the benefit of a college education?
There needs to be full disclosure in a language that anyone can understand. THere needs to be a companion sheet created for the HUD 1 that explains each and every itemized charge in a language that anyone can understand, with numbers not listed in parenthesis in the margin where someone can miss it, or prefaced by initials like POC or YSP that is a mystery to most people; LOs/MBs need to stop talking to clients about points and start talking dollars and cents. Then and only then can LOs and MBs remove the stigma on their industry.
Moe, have you ever tried zabasearch.com — you can located ANYONE on there. Just put in his name and the location of his home, I bet you’ll come up with something.
I haven’t but we just found Mr. Davet. Great guy and it was a pleasure speaking with him.
Thanks for your help!!!!
I am in touch with Dick. Please e-mail me a # and good time to call and let’s meet when I am back in Atlanta!
Nye Lavalle
Nye,
I’ve been trying to find a contact number for you. Please email me! I’m fighting the same fight you are, at this point mostly against me lender American Home Mortgage. Recently finding out Goldman Sachs Trust GSR 2006-OA1 holds my loan, with Wells Fargo as Master Servicer and Deutsche Bank as trustee. I’m being attacked for my advocacy work and will fill you in on it all.
Paula Rush
A sheriff’s sale was scheduled for March 12. Countrywide postponed that after I filed complaints with state and federal authorities. There is no attempt to follow Fair Credit Bureau standards. My homestead exemption was also deleted last year without my knowing it. If the property had sold at auction last week, I would have received nothing.
I have lived in the house for 20 years, have a small mortgage, and fell behind due to an injury at work.
How do I contact Richard Davet?