I'm Morgan Brown, a mortgage broker; please – let me explain.
I usually don't tell too many people I'm in the mortgage industry, because it can be embarrassing. I didn't start in mortgages but I ended up here through a series of events to where I now own a mortgage company. I am here because I thought I could change the world of mortgages. I learned quickly that it ain't easy.
I wanted to give you a little insight from a mortgage company owner's perspective on this whole housing market/mortgage market meltdown; and I want to start with this thought: people are getting desperate, and it scares the crap out of me.
Home owners are getting desperate. They call us up looking to refinance like they have 4 or 5 times over the last 3 years. They can't believe that they don't have any equity to cash out. Loan officers are getting desperate. I know at least 3 loan officers personally who are declaring bankruptcy right now.
I spoke with a woman the other day who wants to refinance. The only way I could get her loan done is if I (1) stated her income on her 1003 much higher than it actually is (2) convinced or found some appraiser to push her property value far above the latest sales comps (3) put her in a "consumer-friendly" negative amortization loan to show any monthly payment savings. I won't do it. She'll probably pick up the phone and have a new loan from a desperate loan officer who will have no problem doing it and, oh by the way, make 3.5 points (~ $14,000) on the back of the loan from the lender.
I also get embarrassed to be lumped in with some of the cons that got in to this industry when the getting was good. Keith shared with you the "mortgage hottie" and you've probably heard about the broker/salesperson husband/wife duo that checked in to the Laguna Beach Montage with cash and guns; these people make me despise the industry and make me feel sorry for anyone that has to get a home loan.
But I can't sit here and say I'm perfect. I don't do loans and I don't see every loan that goes through my company doors. I know we have angry customers who feel cheated; I am sure there are stated incomes and pushed appraisals that would make me more embarrassed to be in my industry than I already am. All I can do is try to fix it one person at a time one loan at a time.
Thank you HP'ers for keeping the focus on us, those in the industry that should be held accountable, and for not varnishing the truth. I hope that the millions of people who are facing financial ruin are saved by the Grace of God - but not with our tax dollars
May 10, 2007
A mortgage broker writes an important open letter to HP'ers. Here it is in its entirety.
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46 comments:
If you believe that is a real letter I have so beachfront condos in Iowa I'd like to show you...
This letter says it all - people are in a panic because the housing equity ATM is closed, their cards are maxed out, and gasoline (here in SoCal) is $3.70 a gallon. . .Jesus - even I am getting a little nervous - should I sell all my stockS? Even the utilities?. . .I realy think the bubble in Shanghai is going to burst (see today's editorial in the Financial Times). . .the only thing I take issue with in the mortgage broker letter is that the client will call another broker and get a loan. . .I have heard from my banker friends that even people with great credit scores are getting turned down.
He's right: the entire industry has been given a black eye by all of this mess. The 2% who are honest are going to be mad to look bad by the 98% who are slimeballs. :)
Nice to see a broker who at least steps up to the plate to admit there's a problem, and that they play a role in it.
FWIW, here's a great collection of slimeball sub-primers:
http://tinyurl.com/2dyvdw
Don't you just love how they're trying to defend the indefensible? Nice group of a-holes, eh?
I am a mortgage broker as well and I respect what you had to say. I have been in the business since 1995 and am a producing broker.
I started in 1995 as a loan officer and eventually in 2000 started my own shop with a business partner.
We hired several loan officers and grew to about 10 employees.
For 5 years we were doing FHA and VA and Fannie Mae loans with full documentation of income, debt ratios under control by underwriters and funding a lot of deals. We really worked hard for our customers and things were good.
We made customers scrape up the 3% down payment required for FHA and Fannie Mae. We made them pay off collections to qualify, justify bankruptcies and their past credit lates. It was hard work, but great money and we helped a lot of people get responsible financing they could afford.
After 911, and I don't remember how soon after, things started changing. yeah, I know they lowered the Federal Funds rate to 1%, but it's more than that.
Sub prime became so strong and demand for it was like a drug that we could not sell FHA or VA, nobody wanted it and they could not qualify anyway because the price had risen so hard. The prices rose so hard the borrowers were pushed into the 80/20 two year fixed loans.
Our business all went over to 80/20 non prime in a matter of one year. I would say it was 2002 when it all became non prime.
When I opened my shop I was the only loan broker in the building. Now there are six loan brokers in the building, many of whom will close.
It was very hard as an ethical loan broker to do these loans, however the customers were going to close them with us or someone else. We tried to find alternatives such as FHA VA FM but nobody qualified. If they did we did the right loan for them. Most had blemished credit and no down and did not qualify for a traditional loan.
My income from 2001 to 2002 went from $150,000 a year (which was normal for me) to over $300,000. It was ridiculous. I was working 6 days a week with my loan officers closing purchases.
What is frustrating about this is that it was not driven by "dirty bad loan brokers" This mania was purely fueled, created and funded by Greenspan's reckless policies and the non prime and Alt A banks predatory loans created to lure the borrowers into the housing market to avoid a recession after 911.
Everyone runs around saying how the loan brokers did it. Senator Schumer from New York is on the bad loan broker band wagon...saying on cnn that the "repacious loan brokers did this"
While I was quietly making a responsible decent living helping first time buyers into homes in safe loans out came the junk loans and junk they are.
The banks developed, marketed, underwrote and funded the loans and used the loan brokers as their originators. Washington Mutual owns Long Beach one of the worst, but washington Mutual is clean in all this right? There are many more examples of the A banks owning Non prime banks. Morgan Stanley, Chase, JP Morgan all owned and fed New Century, but they have nothing to do with this collapse right?
It is those loan brokers......most every bank in the us has their hands in non prime. I would like to know where they will stand in all of this? We have idiots like Schumer running around with hi pea brained blame on loan brokers.
I know there are a lot of dirt bags in the business, but most are being pushed out. There were so many idiots in the business beating my door down for a job during the boom. I told them to stick with their normal job.
I have saved over half a million dollars for this rainy day and it looks like it is going to be a hurricane.
Volume is at a trickle, nobody can refinance, it is going to be a blood bath.
Again I respect what the other broker said.
what is disgusting is a U.S. Senator running his mouth saying the loan brokers did all this, he even said "these loan brokers aren't from banks," as if banks are saints....yeah right.
So he runs his mouth because that is what he has been fed by his bank lobby.....the brokers did it....the brokers did it...
He is proposing a U.S. funded bail out to the tune of $300 million to be given to "non-profit agencies" who will help these borrowers refinance.
Really how will they do that? Give the funds to the non prime borrower to pay down their mortgage because they are backward in their LIBOR ARM that is adjusting and they don't have the equity or score to refinance?
How about make the banks who created this train wreck pay for it? Naw lets go screw the tax payer....
The banks did this not the loan brokers....the brokers were along for the ride....like everyone else.
Wonder, how many security holders are going to sue the ever-loving crap out of mortgage company owners, appraisers, realtors, homebuilders, bond traders, rating agencies and all their after partners in crime.
I'm gleefully looking forward how this rather amusing yet somewhat mentally deranged financial desaster unfolds while the dollar's purchasing power tumbles down to ZERO cents in the coming 12 months.
GREAT SHOW US of A! No doubt about it!
PS.
Face the music, you mortgage people royally fucked it up in the first place! You as an industry have failed!
300 million dollars equates to less than 500 bailouts once you figure in overhead, advertising, the MOUNDS of disclaimers that will need printed, etc. That wouldn't fix a zip code in Kansas. Of course, since the fico scores won't be there, and the equity won't be there, and the potential homeowner being salvaged will have to explain what he did with the 150k heloc money won't qualify, and the income won't be there because well, the borrower lied about the income, maybe there are only 500 or so households to bail out....
The letter is very eloquent. As is the message from the anonymous loan broker above. But what does this mean - "I thought I could change the world of mortgages"?
There is no World of Mortgages - it's about securing debt, not providing the community with homes.
A loan broker, any broker, is a middleman - one who does well off passing notes between principal and supplicant. It's a privileged position that should remain neutral - until market forces determine otherwise of course.
There is no principle involved here. Brokerage in all its forms is a business perfectly fitted for corruption, going with the flow and letting insurance cover the consequences - if anyone can afford to litigate it that far. Ha ha.
Change the World of Mortgages? My arse!
A rare dose of honesty in a swamp of corruption and lies.
It's really kind of refreshing!
I'm sorry this guys business is about to be obliterated.
LMMFAO!!!!!! I really can't believe that letter came from an actual broker, who here sent it?
The interesting thing is that there are alot of folks who overpaid for there big home woth there big eago. So the battle at the water cooler is who will flinch first and put there home up for sale. I detect alot of stress building as this housing meltdown begins to work its way up the pyramid. As with all pyramids the crash begins at the bottom until values at the top can no longer be suppoerted. Who will win the battle of egos at the water cooler?
The other interesting thing is that if one sells now and gets out while they can, they end up looking like a smart investor in only a few days.
I really wrote the letter - its not fake.
There are a lot of good points in these posts. As to the last one about "changing the world of mortgages" as a firm believer in businesses delivering an honest service to a constituency I truly thought walking in that I could provide low costs and honest service and "protect" people from unscrupulous entities that would take advantage of people.
That is what I meant by "change the world of mortgages" - its a naive position and thought for sure - and I'll happily take the blame for being naive about the industry.
I still think that people could be served by brokers that work in their interest to help them with their home loans as long as the system wasn't so bent to rewarding brokers for acting with out concern for anyone but themselves.
And if I was anyone else I'd be pissed at me and anyone else that is associated with the industry no matter what comes out of my mouth - the trainwreck has so many different culprits that everyone in the chain is responsible from the government, to wall street, to the banks, to the brokers, to the borrowers - it all adds up.
So I have no problem taking heat for being in this industry regardless of what I "set out to do" or otherwise.
Morgan
Oh the individual homedebtor will be saved, but only because the bailout will really be for Goldman Sachs, Morgan Stanley, Bank of America, CitiGroup, etc. The bill will be put on the government debt tab, and provided the rest of the world goes along and doesn't through their U.S. Treasuries and dollars to the wolves, the dollar will just be tremendously devalued. Hello $8 gas!
The truth hurts.Get togehter a bunch of con men in suits and there you have it, the lending industry.Thank god for people like csaey serin who don't know their @ss from a hole in the ground.Smart people are laughing all the way to the bank right now.
What housing bubble, no really?
$300 million? that can't fix anything. They will pork that thing to 3 billion....
remember this is going to be about bailing out the poor banks who got screwed by those naughty loan brokers who put those poor borrowers in the loans the banks were peddling in the first place.
"A loan broker, any broker, is a middleman - one who does well off passing notes between principal and supplicant. "
Everyone on this planet is a middleman, and every job is noble and every job is 'squat' in some form of another. Some people push paper, some food, some software, some energy, some manufactured products, some political BS.
Hell, even God is a middleman if you think about how he pulls and pushes his products (people, living things, etc) to and from the natural universe (birth, death, randomness, chaos, evolution, etc).
Anon, you should really use a name. But thanks to your post I can see how it might be possible to be a mortgage broker and also an honest man. I have a friend who is a mortgage broker, a nice guy, and I don't dare discuss the housing bubble with him for fear of ending the friendship.
But let's be careful not to absolve all mortgage brokers. There are many of them that are scumbags who were only too happy to do the banks bidding and put people into mortgages they had no hope of ever paying back. There are many brokers out there who played a key role in this disaster.
That said, I fully agree with you about Chuck Shumer - he is the enthusiastic whore of the banking lobby. You are damn right that the banks (and their other puppet, the fed) got the ball rolling in this debacle. They should be held accountable.
But I don't think anyone should be bailing this crisis out - the only thing to do now is let it run it's course and let prices come back to earth. Let the big hedge funds and pensions funds who bought these mortgages sue moody's, s&p and any other ratings agency and wall street firm who represented these mortgages as secure, reliable investments. That is the only way for this to resolve itself. Have some faith in the courts.
to mortgage broker .
Does it make you feel better trying to blame the fraud lending on the banks ? All you front line creeps helped these borrowers submit liar loans and you made tons of money for doing it . As you noted ,your income doubled .
You and your scum realtor cohorts could of refused to put unqualified buyers into sub-prime loans that you knew were time-bombs . Instead you foreced appraisers to raise the values and you you just put that liar borrower into the inflated real estate .
Don't you get it jerk , if you guys hadn't turned criminal , the market would of contracted in 2002 and people would of still bought real estate ,but at lower prises that they could affors . True that alot of you speculator flipper would not of bought and you would of made the lower income of 150k instead of 300k . Boo-hoo . You all did it for the money .
WHen did you become corrupt ? Was it a slow process or did it start with just one deal that you knew was a big lie ? Did you say to yourself that you will never get busted because real estate always goes up and you were passing on the risk?
Did you say to yourself that you were going to get repeat business from sub-prime dumb borrowers trapped inthe sub-prime scheme of forced refinanced.
Did you really believe it when you said to borrowers they could just refinance out of these loan once the payments went up knowing that you would clip them with a pre-pay you slipped in and another big commission with the refinance .
Nobody that is decent would of did what you guys did and you just did it for money ,so don't tell me you were just putting people into homes .
You screwed you fellow man and American will go into a big depression over this . Lenders are the watch-dogs of the industry and your failed to do your duty for money gains .
Stop using the excuse that other lenders were doing it as if that makes your fraud and your agents fraud OK .
If you don't have guilt in the dark hours of the night my friend than your hopeless .I can't believe you think its great that you saved $500k and think it's ok that you got yours when you helped bring America down . I hope you get arrested . You sold your soul for money, don't you get it .
I would suggest that you do something to save your soul .Why don't you save that old couple that you made 20k on .
I think one of the things that is different about this crash than any other in history is the blogs......the blogs are difusing information at a astounding rate. it cannot be underestimated. the free flow of information and ideas is still here on the net for all to see. one day soon those in power who wish to control this free flow of ideas and informtation may well attempt at stemming this flow, but so far ok......so, this free flow of information is there for all to read and ponder. and as they get on the television and pontificate and speak their words, we know them for what they are, all liars......all divoid of conscious.....you look at the boob toob and you hear one thing and see one thing, and then on the web you hear and see totally different things....how can this be? someone is lying. we all know who the liars are don't we? yes we do....we see them for what they are....traitors and liars and cheats, thieves....may the blogs continue to flourish and furnish the readers with interesting information, and useful information in order for us to make intelligent decisions about this world and the events that are unfolding before us.....the blogs are the new frontier now....may they always be free....
Its loan managements/underwriters job to prevent fraud and underwrite loan packages. There is no way that management would not be aware of what the front line loan agents who deal directly with the realtors and borrowers were doing .
You mortgage people knew you were passing on the risk of these fraudulent loans and you took the gamble that real estate would continue to go up and hide all your sins . In fact , you expected to get repeat business from those sub-prime junk loans when the payments adjusted because you knew those borrowers could not afford the adjusted up rate .
What a gig to take a piece of the equity every time the borrower needed to refinance because they never qualified to begin with .
Did you ever do a break down with the borrower on just how much their real cost of money was every time you refinance those borrowers into a new teaser rate on your timebomb loans .
You people in the business knew those loans were designed for just a certain type of borrower yet you peddled those loans to the masses.
Go back to the hole you came out of .
is this the guy who started the mortgage broker asosciation for responsible lending?
It brought tears to my eyes...NOT!
Jobs of mortgage broker, Realtors, car salesmen, travel agents,should all be erased for good.
These middle-men blood suckers bring no value to buyers, especially now with the Internet. Theses jobs make absolutely no sense in this century.
Yeah, right. Out of the blue the "honest" mortgage brokers and real estate agents are coming out of the woods to sell principles. Where were you 3 years ago?
There are no honest people in brokerage business. As a matter of fact, it's hard to find honest people in any sector these days. They are all willing to sell their mothers for a buck.
"My income from 2001 to 2002 went from $150,000 a year (which was normal for me) to over $300,000."
Don't spend all, save some for the gazillion lawsuits heading your way.
When the mortgage people and the REIC are interviewed on the business channels, they are constantly harping on the government regulating tighter lending standards, and warning them no to do it.
Do I here one word about the investors already issuing tighter lending standards, by cutting off the supply of mortgage money? No Not one word.
The investors issued the tighter regulations already. Can we have a discussion on this topic?
I am freakin PISSED that my free housing ATM money has been turned off. I can't believe I don't have any equity to cash out!
It must be tough to be honest or moral in that mess
So I guess we're out of denial, Keith?
Guys, ease up. It's pretty amazing that two (2!) mortgage brokers are now HPers. Maybe we should say "welcome home"?
Nice to see *some* of them are honest.
As for the dirtbag boiler-room mortgage clowns in my building, I finally was able to move to a different office on the same floor to escape their high-fives and yells everytime they rip off a new victim.
It turns out several other people complained to the building manager and also moved.
Apparently though, they won't get evicted because they're black and the building is terrified of a racism lawsuit. This country has REALLY gone too far.
I'm not racist and believe in equal rights for everyone, but I've absolutely had enough of these special priveleges for minorities at the expense of the rest of us.
To the Anon. Broker of 8:12-
that i an amazing post. Have you ever thought of perhaps sending it to one (or all!) of these politicians?
Thankyou. I really love hearing from these brokers.
The banks did this not the loan brokers....the brokers were along for the ride....like everyone else.
He is right, the banks did this and I'm not saying that the brokers didn't have any fault, but these Sub Prime Banks and Brokers are the sheep that will be slaughter along with the rest of us who will have to pay for this big mess. So don't loose track of the real criminals here, BANKS all the way up to the GreenSpan and his gang!
Honest, ethical loan officers:
It must feel like a pro health-food nutritionist competing against heroin-infused chocolate dealers.
Then again, just about everybody trying to be an honest working stiff in this entire hypercapitalist economy feels the same way.
They get the gold mine; you get the shaft.
Can you imagine what would happen to a honest mortgage broker or agent in the last 3 to 5 years . The realtors would of cut that agent off and he would of been fired for lack of production .
The realtors took the loans to the people who would make them . I don't know when everyone starting crossing the line and than justified it because everybody else was doing it, but that's what happened .Than you all cut off the good appraisers in favor of the rubber stampers . It got down to the fact that the only people left was the fraud teams .
All the loans had guidelines and you all know you just tried to make the packages and income look like they conformed to the guidelines .
Just face it, the bulk of you committed fraud for a buck . The borrowers were stupid enough to commit fraud also with the realtor/loan agents help .
Wasn't it hard at times to dream up income for cherry pickers .You must of signed up borrowers in the dark to get the pre-pay clauses pass them . Better yet you most likely told them that was the only loan they could qualify for , the loan that paid you the most bucks .
When you told people they could not lose because real estate always goes up did you do it with a streight face or did you have to divert you eyes because it was a bold-face lie. Didn't you feel bad when you could see that the borrowers believed you ?
How often did you really explain the teaser rate and the fact that the stupid sub-prime loan was going to hit the moon on effective interest rate charged within a short time ? No you just told these jerk borrowers that they could just refinance once they made the promised appreciation on the already overinflated property . Wow , if the borrowers knew how much money you were getting on the back end in commissions to make the loan , I'm sure they would of know it was a scheme .But the borrowers thought they were getting a good deal because of no money down .
You all make me sick , and your still trying to keep the party going .
How are you going to fix fraudulent loans by liar speculators and borrowers . It's the end of the road for being able to make any more money off these doomed loans .
I'm sure you are hoping for interest rates to go down or a tax bailout so the borrowers stop calling you crying that they are going into foreclosure .
I will never get over what you clowns did ,not to say that the borrowers were not also to blame . Borrowers are always stupid and it's always been up to the lenders to keep borrowers within lending guidelines .
What about the fact that borrowers thought they were getting a real appraisal ,rather than a bribed appraiser you people sought out .
It's really really really really bad what you people did .Screw your realtors that shot you the dumb dumb borrowers .
Anybody here bitching about the greedy brokers and who also voted republican:
What do you expect after 30 years of an ever-increasing influence of conservatism? That gutter ideology is all about nurturing greed, cultivating it, harnessing it. But hey, as long as a few got rich that's all that really matters, right?
"Maybe we should say "welcome home"?"
They're desperate looking for customers...even here!
I'm not sure but must be the Operations Management course I took. Am I the only one who sees these brokerage jobs as useless as the five points inspection at Jiff Lube? I hate bottle necks.
"Anybody here bitching about the greedy brokers and who also voted republican: What do you expect after 30 years of an ever-increasing influence of conservatism?"
What an idiot... What conservatives have to do with greed? The latter exists for 1000s years, moron. How about some fiscal responsibility?
Is it just me or does it seem like a fairly large number of posters don't understand the difference between the words 'than' and 'then'? I see this other places also.
If English is their second language 'than' it is understandable though.
What does conservatism have to do with greed? For most conservatives, greed is seen as good, a virtue, something to be encouraged.
So don't complain when greed bites you in the ass if you vote to support that vile ideology.
Is it just me or does it seem like a fairly large number of posters don't understand the difference between the words 'than' and 'then'? I see this other places also.
then/than, it's/its, their/there/they're and many many others
Most HPers don't know have basic grammar skills. Not too surprising that they rent apartments, bitch about $3 gas, work in professions where they think illegals will "steal" their jobs. Blue collar, uneducated and envious of others. They are amusing though.
OK everyone, commence with the "I make $200K a year" posts. Amazing how everyone here makes $200K, has a PhD from MIT yet can't distinguish between the words lose and loose.
The entire REIC is a bunch of hoodlums.
What does conservatism have to do with greed? For most conservatives, greed is seen as good, a virtue, something to be encouraged.
So you're saying we should ban capitalism, distribute wealth evenly, and live under communism? That plan hasn't worked out so well in the countries that have tried it....
You bitching that you're not rich? Well then get off your lazy ass and make some money.
Do you really think conseratives encouraged "fraud"?
Yes conseratives like the concept of a free market economy ,but there has to be rules of the game .
Conseratives are into law and order ,not anarchy in lending .
This was just some weird housing boom mania where somehow the lending got out of control along with some big real estate REIC PR campaign that convinced people that real estate was a "sure bet" investment .The media didn't call the bubble and the advertisers got the positive press they wanted in order to sell .
Look back , did you ever see so many commercials that were so real estate related . I don't think I saw many aspirin commercials during the housing boom .
Real estate was crammed down everyone throats and other industries were not bitching because people were taking out equity loans and spending alot of money on everything .
People were brainwashed into the "new think" that debt was good and they could not lose because real estate would finance it .
People just failed to see that they would run out of greater fools to buy their inflated real estate plus eventually people would start backing off from inflated prices because of affordability .
Many builders and realtors have confessed that they thought the the run-up was going to continue until the end of this decade .The REIC got caught in a down-turn in which the cheerleading myths about real estate investment wasn't working any more .God know the REIC is still trying to get the party going by, "It's a Good Time To Buy ","Why Rent When It Cost The Same To Own?","The Bottom has been reached ,buy now before it goes up again ." Lies ...all lies .
Corrupt capitalism is no better than totalitarianism. Well, I guess the people are more free to fuck each other over with our form of capitalism and I know how you republicans love that.
Sorry, you can't have a greed-soaked, materialistic culture and not have a lot of corruption. Elevating making money over all else (which republican/conservatives do) leads to the disgusting culture we see today.
And plenty of capitalist countries have gone under, including this one. It wasn't until Roosevelt injected us with a huge dose of socialism that it was saved. I kind of wish he hadn't. Thene we would have become socialist and the world today would be a fairer, more peaceful place. But when your eceonomic system is based on the worst instincts in humans the result is an ugly, coarse world.
I can't help but sound off on this political ideological debate now. I'm not going to talk republican/democrat because the electoral system rewards the worst elements in both parties and they are both filled with lying, pandering demagogues.
However, I will say this, economics lie at the heart of every society and they should be placed at the forefront of any policy discussion. The goal is to maximize the output of your economy while ensuring that the products of that economy are allocated in a fair and equitable manner. Medicine for the sick, homes for the staff who care for the sick, clothing for the children of the police and firemen, that's all products of the economy - the more of that we can produce the better off we will all be. A socialist government discourages efficiency improvements in the output of medicine, homes, clothing, etc and makes us all worse off, even those who socialism purports to help most.
That is not to say that I advocate an entirely unfettered and unregulated form of capitalism - there are natural monopolies and other areas where capitalism on its own cannot be relied upon to operate fairly. We just need to make sure that we do not EVER discourage competition.
COMPETITION IS THE KEY TO INNOVATION AND PRODUCTIVITY IMPROVEMENTS AND THIS IS THE KEY TO PROSPERITY.
This does not mean that you cannot tax reasonably and redistribute some of the wealth and income where needed.
Read 'The Power of Productivity'.
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