Reader Contributed – Chris the Mortgage Broker - In response to this post
I’m a broker and let me lend a little light on who should go to jail first. And yes, JacMac is right; you will be attack for your comments before the day is over. 
Get ready
You have to jail the source. Wall Street, then the Banks/Lenders, then the brokers and maybe some consumers. It goes down hill. Richard you have to be cognoscente on using that broad statement. For the brokers who outright committed fraudulent acts……..yes they need to go to jail and some are and will. But you have to appreciate the ones who are originating per guidelines, these bad deals.
They won’t ever go to jail nor will they be responsible for buying the loans back. For mortgage bankers, the rules are slightly different and they are responsible to some degree for the deals they originate.
Brokers don’t create the rules, they execute them. For that you won’t ever see a broker go to jail because the guidelines have been approved far up the latter before they reach the streets.
The violators are the ones who created income, i.e. w-2 and fake check stubs. Mind you, this should not be mistaken for stated deals. Two different problems.
However, the sad part is that bad advising and suggestions won’t incriminate a broker or a mortgage banker. As it stands brokers are protected by not having a fiduciary relationship with the borrower. It sounds crazy but I can suggest to you whatever and if you do it and it doesn’t work out, then oh well. I don’t agree with it. Not because it’s not a legal rule but its bad for general business.
You also have to appreciate that with the bad products, comes the borrower that wants more than what they can afford and won’t settle for anything less. The industry’s biggest problem is who’s to blame; the product that can legally give the borrower what they want or the borrower not heeding good consul and taking the crazy deal.
Go to the 60 minutes website and view last Sunday’s telecast on the mortgage crisis. They have two couples facing a losing situation on their homes. Who should go to jail on these two deals?
The first couple didn’t read anything nor double check the information they were told or signed at the closing. The husband went as far as to say he didn’t even consider the note adjusting because he wasn’t paying attention to his paperwork. Never mind what the L.O. may have told him, he didn’t even try to protect himself. At the closing table they saw the change up on the paperwork and signed it anyway. They wanted what they wanted. Everyone is wrong here including the borrower.
The second family admitted to knowing exactly what they were doing. They knew exactly what the loan terms were and since the market values went down and paying the note made no sense to them, they said f**k it and will just walk away from the house.
Mind you, they told the reporter that they could afford the note and wasn’t late on the bill. They just didn’t like that their value diminished. Are they wrong? Yes. They wanted what they want and since they couldn’t get it they will walk. The L.O. got them what they wanted but the market changed. Should they go to jail? They knowingly reneged on an agreement they can afford. They just don’t like the outcome. So who is to blame?
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Chris…..great post….
I can’t help myself and this information is given with the utmost respect……
the correct spelling of words in your post are: cognizant/ladder/counsel…..
“you will be attackED for your comments before the day is over”,,
Have you ever looked at a Amortization Schedule on a 30 year fixed mortgage? This is why people are walking away from this nonsense
People move every 3 to 4 years, and it takes 8 years to make a dent in the mortgage. The greedy banks set this up so they get paid FIRST, not the person with the mortgage. We dont have the time to pay on a mortgage for 15 years, especially if it’s adjustable rate, so we can sell the house and break even.
It was a feeding freezy, the industry snowballed out of control. Too easy, too fast, too much. Everyone made a killing, now it’s time to feel the pain.
If you put all the people in jail who were involved in this nonsense, for the first time in history they’d be more white people in jail than black…………… wait that’s not possible
If you want to put people in Jail..don’t forget to include the mortgage brokers FIRST-why? Because as a realtor my job is to send the buyers to a mortgage broker who is suppose to QUALIFY them for a mortgage based on what they could AFFORD..and yes..there are good brokers out there who do that..but many looked at buyers as their next BMW payment. So brokers did not do the best for the buyers but instead looked at the programs that paid THEM the most amount of money on loan(The legal bribe). Even if the person could have qualified for a fixed they put them in a ARM! Because the YSP paid more!! Then the process snowballed from there. Most brokers learn after time how to make the file pass. The learn the weaknesses in the system of the lender and use it against them. I am happy tha wholesale channels are diminishing or being tightened for brokers. They have gotten away with too much in the past.
Yes there should be some recourse from just walking away from the loan and there is…the buyers credit will be damaged!..But hey for how long?..Before you know it lenders will be back tooting to buyers 1-3 years out of foreclosure and the MORTGAGE BROKERS will be at it again..getting paid high commissions for puting these people back in to homes! THE CYCLE CONTINUES>>>
Ann,
As a realtor, you shouldn’t be attacking mortgage brokers as a group. Realtors have been cheerleading the run up in house prices as much as anyone. It’s always the right time to buy according to the NAR because prices always go up. If you don’t buy now you’ll get priced out of the market. All sorts of this drivel came out of realtors’ mouths designed to run up prices to get more out of that 6%. Greed, greed, greed. I’m guessing you’re angry about the bad situation because of how it affects you. An attack on brokers probably makes you feel better because you can minimize your own fault in the matter. If realtors don’t accept their own screw ups and the greed that bred it, then they can kiss whatever scraps of credibility they have left good bye.
http://en.wikipedia.org/wiki/Due_diligence
As a concept in civil litigation
Due diligence in civil litigation (also known as due care) is the effort made by an ordinarily prudent or reasonable party to avoid harm to another party. Failure to make this effort may be considered negligence. This is conceptually distinct from investigative due diligence, involving a general obligation to meet a standard of behaviour. Quite often a contract will specify that a party is required to provide due diligence.
Realtors?? Credibility??
Those 2 words should never be used in the same sentence!! Why is anyone even using realtors and paying 6% commission when there are so many “Cash Back Realtors” who will give you, the buyer 2% back at the closing table??
Do your homework people!! Realtors are not protecting your interests, even though they DO HAVE a fiduciary relationship with you!! WHAT A JOKE!!
You are kidding yourself if you think a realtor is taking your interest to heart! They are just as greedy as the next broker. I can’t begin to count the number of realtors that have pulled loans from my company because “their” borrower did not qualify for the home the realtor wanted to sell them.
I have also had realtors produce false SS cards, W2s and check stubs! So don’t try to tell me how ethical/credible you are as a realtor!
I had many reltors yelling at me and treath me because I told them the borrower didn’t quaalify and they end up taking them elsewere.
Guess what ??? those people are facing foreclosure now !!!
Thank You Realltor !!!
Okay here’s my two cents, everyone is right.
There are many contributors to this problem as has been said over and over, but here’s the thing, if anyone who participates in the loan origination process, from the brokers who supposedly qualify the lenders for the loans to the Wall Street investors who provide a demand for the type of loan, to the banks who create the products being offered — if any single one of these groups escapes accountability for their wrong doing, this leaves an open door for the massive — and I mean massive FRAUD to continue.
All of us, individually, collectively on the whole can only be responsible for what WE do wrong.
Let me give you a little illustration. My daughter came home upset. A boy in her school was playing with another boy and held him down in an awkward position that kept him from breathing. He pleaded to be let go but the boy didn’t let up. Finally he did and went off happilly to play basketball.
When the injured boy recovered his breath, he went off after the boy playing basketball in a rage. The school teachers seeing this (but of course failing to see the original injury) wrestled with the boy to the point that they had to handcuff him to subdue him.
My daughter said it was so sad, she was almost in tears.
I asked her why.
She said because he was the one that had been hurt by the other boy but they put him in handcuffs.
I asked her: “Did you say anything?”
She said, “Well, everyone was yelling to let him go.”
I laughed and said, “Didn’t you hear my question, I asked: Did YOU say anything.”
She said, “Well the teachers did eventually go get the boy from the basketball court to ask what happened.”
I said: “I didn’t ask you what happened I asked you if YOU said anything.”
So she blushed and said, “No.”
So I asked, “Why?”
She was silent and so I took the opportunity to explain to her about the Bystander Effect. It’s this crazy psychological phenomenon where the more people there are witnessing a crime or a heinous act, the less possibility there is that anyone will do anything.
You see, everyone is thinking THE OTHER PERSON will do something about it, so they don’t have to.
The phenomenon was coined when in 1967 Kitty Genovese was attacked and screamed for help FOR THIRTY MINUTES. Thirty-eight people watched from their UPSTAIRS APARTMENT windows AND DID NOTHING.
Finally one person called 911 and the police arrived in two minutes.
So here’s the moral of this story. ALL OF THE OFFENDING PARTIES NEED TO BE HELD ACCOUNTABLE.
BUYERS: Get educated. Do what you can to save your homes. If you can’t do so, save your credit and your livelihood. That’s right, I said it, Leave the homes to the hands of the banks who should have known better.
Don’t listen to those who want to talk about responsibility to pay debts, this is business. Half of you guys were swindled and you didn’t even know it. You bought a house that wasn’t worth what they said it was, and the person handing you the keys had given you a bag with a hole in it to carry the debti.
Soon the equity and your hard earn money started leaking through the bag, and now you’re supposed to fix it, because you should have looked at the bag closer. Okay, maybe you should have, but if you can’t carry the load without the bag, what are you gonna do? You got to leave the crap on the corner and move on. The BANKS who have an interest in the house, will come by and clean up the mess. They have no choice because no one else will do it for them. It’s their house after all. They’re not afraid to let you know that if you ever stop paying the mortgage.
MORTGAGE BROKERS: Get some integrity. If you have it, then you don’t need it. You know who you are. Stop making excuses and playing the blame game. It’s time to pay the piper, and you’ve made enough of a profit to do so — unless you were also caught up in the debt cycle, then you have nothing left. Drug dealers go straight to jail. They don’t get to blame the supplier. The supplier goes straight to jail, they don’t get to blame the manufacturer. Supposedly the manufacturer should go to jail — he doesn’t seem to, does he. That’s the fault of our government officials. That needs to change. But this is a capitalistic society and the biggest drug dealers are the FDA. We all know this, that doesn’t me we, individually should stop calling for justice and what is right.
BANKS: Get serious. You’re about to bottom out and you’ll have nothing left if you don’t start playing smart (and not clever) by modifying as many loans as you can as fast as you can. If you keep thinking you can run the system and get away with murder the hands you burn will eventually be your own.
By the way, Kitty Genovese was killed that night. She could have survived but didn’t. Many of the homeowners being slaughterd are casualties of the greed of Wall Street and the audacity of the banks, who obviously believe they can do whatever they want and get away with it.
If a homeowner wants to walk away, why is anyone having a problem with that? We have lots of ways of dealing with people for breach of contract. In housing, it is called foreclosure. If the lender is stuck holding the bag because the value of the asset has declined dramatically, too bad for the lender for relying on such valuations. Businesses walk away from contracts all the time, when it makes business sense to do so. If I were facing a bill for 400,000 for something that was worth only 200,000, you can bet I would be considering walking away – depending on the cost of doing so.
Where there is no deficiency claim possible, walking away from an unsecured debt in the 100’s of thousands makes perfect sense. The hit on a credit rating will prevent easily repeating the same mistake twice on the consumer side. And having an inventory of homes worth less every day might make lenders think twice in the future also.
Unless there was specific fraud (not the kind where someone rounded up to the nearest 1000 an annual income), no one should go to jail, or even be threatened with it.
For Al the realtor:
I couldn’t help noticing your claim
that it is your job to refer your buyers
to a mortgage broker. Since when?
Last I heard, this was called “steering”.
Since you believe this was part of your
job, please outline exactly what you
included in your investigation of the
mortgage broker(s) and the broker’s
loan officer before you turned your
clients over to them.
Your comments ring hollow and sound
like sour grapes. As “all” of us reflect
on our own responsibility for this mess,
may I remind realtors of just exactly
where the point of sale began. Frankly,
as a group I should think you would
have a little more common sense than
to place charges at everyone else’s door.
Ann,
Your statements show just how uneducated and mindless most (not all) R/E agents truly are. Here is a novel idea…Everybody that YOU sold a home to or that purchased one of YOUR listings, that is now heading towards or in foreclosure, give your commission back to them? “What” you say, “That’s crazy.” Well that is just how downright stupid your contentions are. You Ann with your statements sum up just how unprofessional, uneducated and classless most (not all) R/E Agents really are.
I am going to let you in on a little secret…In speaking with, Appraisers, Title Companies, Home inspectors etc. (I have been in the Lending Industry for 14 yrs) they all to a person have said that the weakest link in the entire transaction is the R/E Agents. Way overpaid for what they actually do… If all of thee above ran their respective business like R/E Agents ran theirs (most, not all) they would be out of business.
Louise,
Ann is the realtor. I’m a soldier.
So sorry, my bad. I realized my
mistake too late. No offense intended.
I should be outraged by being called a realtor!!!!! Just kidding. I know they’re not all bad people. REALLY stupid leadership though. I’m interested to see if Ann has any rebuttal for posts 4, 6, 7, 8, 12 and 13.
Ann,
Most likely will NOT respond to posts 4, 6, 7, 8 12 & 13. She will treat us like her clients. Unprofessionally.
Tracy,
I agree with your comments. A lot of gray areas are in this industry. Walking away sometimes is the best solution in business. But most of the foreclosures from the consumer aren’t going into a deal as “this is business.” It’s a double edge sword of sorts. When the L.O. is originating a bad deal and the consumer, loses then is it just business? Maybe yes and maybe no, but none the less it’s bad. Fortunately, natural mechanism will correct the bad business overall. However, when the borrower for negligent reasons just walk away because the deal wasn’t all they thought it could be then is that just “business?” Yes, but that’s bad business too and other pay the price. The natural mechanism in place will correct that as well. The big problem is no one person or group is fully to blame. It trickles down from Wall Street to the consumer but it also trickles up from the consumer to Wall Street.
Cut out everyone else except these two entities and you can see it more clearly. The consumer wants something. Wall Street is providing it. The intricacies are semantics, i.e., loan debacles, theft, fraud, greed, you name it. It is in those intricacies you find the Consumer and Wall Street floating around. The problem is Wall Street has a product that the consumer has convinced themselves they need and Wall Street is exploiting that need to no end. Does the consumer know this? Yes they do, but they roll the dice anyway.
Now, add the agent, the title attorney, the broker, the insurance agent, the appraiser into it and look at the confusion and frustration you get. This is why I constantly say education is the way out of this thing.
JacMac said it very succinctly. Education. I want to add Accountability. The industry is all business, no play, and no emotion.
Ann- I left out Real Estate Agents, Title Companies, Insurance Agents and Appraiser. My bad. And yes, you too need to go to jail. It begins with the borrower who wants whatever. No crime has been committed yet, but because of greed, praise, inner satisfaction, whatever; most agents are trained to execute the theory of “I do whatever it takes for my client to get a home.”
Most Agents- leave out in that speech, “commission.” You need the client so you will do whatever to make your money. That’s cool. Remember, its business.
Brokers- we look to agents for business. If I don’t satisfy the agent’s needs, they go somewhere else. Commission gone.
Appraisers-They look to brokers and banks for business. If they don’t give us the results we need, then we go somewhere else.
Insurance agents- same as the appraiser
Title company- if they explain toooooo much and the borrower backs out the deal then we (meaning the agent and the mortgage broker) go somewhere else. For the title company
The bigger the sale, the bigger the check everyone gets. Everyone. The borrower gets the big house, the seller gets the big proceeds check, everyone’s commission is “fat” and when the borrower is homeless, looking for some answers we all direct them to someone else. Ann, save you “g” for someone else. YSP hasn’t been a topic here for some weeks and since you brought it up, let me ask you a question.
Can you explain to everyone, on a million dollar deal, what in the hell type of performance you would do to get 6% or 60k?
What do you add to a pre-printed contract that yields that amount of money?
What kind of walk thru do you do for that amount of money?
What are you saying at the closing before you get that check?
What inspection are you performing?
What policies are you binding?
What are you doing? Exactly, nothing. However, agents like you get on everyone’s nerves and disrupt the flow of a deal “doing everything to help you client” And you know what, it’s cool. Because, no one, even myself sometimes can justify the income I make on a deal like that. So sometimes I have to remain quite because any response will sound stupid. So move along with that or accept your role in this mess and offer some solutions.
Ann the realtor should not throw stones at a glass house when she herself lives in one. From the get go mortgage brokers and their loan officers have been demonized by the media, government officials, the NAR for what they are now calling predatory loans made to their clients as well as other observers. Granted, there were and still are those mortgage brokers, who fraudulantly originated home loans – they should go jail! However, the large segement of us in the mortgage business are professional and honest hard working persons.
The dust is beginning to settle in this great debacle and now the real culprits are having their day. Ann’s ignorance is understandable!
From her venting it seems she has NO CLUE as to the role of a mortgage broker. Here’s a quick lesson Ann, mortgage brokers do not create home loan programs, write guidelines for those programs nor fund loans.
I have worked with some of the best realtors and I have come across some of the worse who give their organization a bad name. I don’t judge the entire industry on the less than professional practices of those few individuals. Ann’s blanket statement accusing all mortgage brokers of being shady is baseless, unprofessional and exposes her ignorance!
Here’s what I think everyone did wrong (not all people in each category made each mistake of course):
Realestate
1) Convinced (tricked) people into an overpriced market (greedy)
2) Convinced people that realestate always goes up (immoral)
Borrowers
1) Bought too much house (greedy)
2) Didn’t analyze their financial situation, give themselves a safety net (foolish)
3) Didn’t perform due diligence chosing a mortgage (foolish)
4) Falsified documents to qualify (illegal)
Brokers
1) Committed fraud in falsifying criteria (illegal)
2) Guided borrowers in to high cost loans (greedy)
Appraisers
1) Providing inflated appraisals on demand (greedy)
Lenders
1) Didn’t maintain reasonable lending standards, and thus gave loans to people that shouldn’t have had them (foolish/greedy)
2) Turned a blind eye to fraud (foolish/greedy)
Wall Street
1) Turned a blind eye to the detachment of risk of owning mortgage debt from underwriting it – CDOs (foolish)
Government
1) Couldn’t be bothered to pay attention to what is going on (more of the same)
Don…..very good analysis….I agree 100%
Al, so I get you’re saying that foolishness, greed and immorality are at fault? Is that it?!?!?!
Seriously, Al, I like your post, but I think you need to tac on some greed to the Wall Street Investors.
I was being sarcastic in the first line and supportive in the next, and then sarcastic again — I hope that was clear, Al
Great job Moe!
19 down and only 2.1 million to go
great job
Keep up the great work Moe. You are changing lives for the better and that is always a good thing. I have to get a link up on my site to you. Been meaning to do it for a while now.
Thank you!! I’m on the Hope Committee in Dallas–working hard on getting the word out–what a refreshing idea!! Words cannot express!!
Wow!
Yay what a happy story. Just postponing the inevitable in most cases though. I would be surprised if a single one of these works out for more than 2 years. Just jingle mail it people and rent something
Nice job on his part. Even keeping an extra 19 people in their homes is more than Congress can take credit for, since their policies have been directly or indirectly responsible for the over 2 million expected to face foreclosure. That’s a deep hole to dig oneself out of, but good thing the market is there to help clean up messes left over after government involvement.
Way to go, Moe.
Thanks ya all!
Moe:
I do not know your take on this but I am interested where you stand. For the majority of deliquent “home owners” out there who are way upside down on their homes (which includes most of southern California), do you advise that they continue to work on a loan modification which will guarantee that they continue to live hand to mouth for the foreseeable future or hand the keys back to the bank and make another stab at homeownership 2-4 years down the road when homes are 50% of what they cost at the peak. I just do not see how a foreclosure will have the same impact on a person’s credit given the number of people who have been impacted by this and greed once again takes over the lending market. What do advise?
Moe,
This is awesome. Very sorry for my snide comments on your blog last week, I was very agitated and this whole thing has me very stressed out. Nonetheless, your efforts and insight are invaluable and I wish you and the other members of the forum continued success.
Congratulations Moe. Great piece on KCal 9…..Keep up the good work.
Moe,
You’ve helped more than 19. Just being involved with this forum, I was able to help two homeowners modify their mortgage and save their home. Education. Education.
You are David fighting the Goliath [s] Its nice to see the little guys winning at least a few. doesnt happen in this country very often anymore. We as a nation have been sold off to the god of profits and the modern day lords who have turned us from a nation of citizens into a nation of consumers to be bleed dry and ever increasingly complex financial schemes. I have read the stories of some of the homeowners who are on your site. The pain that these bloodsucking shyster mortgage compaies arre causing the good citizens of this country is truly sickening. I can only hope that thee is a special place reserved in hell for those who have made their millions by causing pain to our fellow citizens. The story of Laserus and the rich man comes to mind
Fight on
“The finest opportunity ever given to the world was thrown away because the passion of equality made vain the hope for freedom.”
Yeah for Moe!!! You’re an inspiration to all of us. Thank you on behalf of all the struggling homeowners out there!
Chris that’s phenonmenal, that you helped some borrowers modify their loans. Whaaaaaaay to go!!!
TOOT-TOOT Moe, you go right ahead!!! There are tons of people who are greatful for your hard work and dedication.
Moe its great that you are providing homeowners with such valuable information.
Facing a foreclosure can be a real night mare.
However these guys really helped me during my hour of crisis.
http://www.loansafe.org
Just thought I’d pass on the info and hope its helps.
Comment: Guys I would really recommend these fellows: http://www.loansafe.org they really helped me when I was facing a SCARY foreclosure scenario. With their loan modification/loan restructuring plan they saved my house from being foreclosed. They provide loan refinancing facilities as well.
Never in my poison have i kissed a hostile advantage but her walnut tasted heavily as sweet.
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