May 13, 2007

Mortgage brokers: Paid to screw their customers ("suckers") as bad as they can

The worst deal with the worst interest rate they can get the client ("sucker") agree to, the more they make. Anyone see a problem with this?



Why doesn't congress regulate the out-of-control-and-corrupt mortgage brokers? You got it - $$$$$. From Common Cause:

Since 1999, ten of the nation's largest subprime mortgage lenders, their trade groups and their corporate parents have given more than $22 million in political contributions to federal candidates: $14 million to Republicans and more than $8 million to Democrats, according to Federal Election Commission reports.

These special interests also have spent more than $187 million lobbying Washington over the same period, according to data from the Center for Responsive Politics and the Senate Office of Public Records.

And now this from Michael Hoskinson of Foundation Realty via BusinessWeek's Hot Property:

"The YSP or "Yield Spread Premium" is nothing more than the Bank's kickback to the broker for doing the loan.

The worse the loan, in terms of interest rate, that the broker gets the borrower to agree to, the higher the YSP dollars go to the broker.

What exactly, other than honesty, is the broker's motivation for helping a borrower get the best available deal?

Combine greed, low barrier to entry and minimal mandated disclosures and you have a recipe for a lending disaster at the borrower level.

Until there are mandated disclosures that spell out, in 14-point type and plain language, what exactly a borrower is encumbering themselves to in total and how the broker or bank is compensated this system will continue to fail the public."


Ben Franklin said...

Quite amazing that these clowns can easily earn $150k/yr minimum in a sales position, in a job that has no educational, credentialing, or professional standards.

Probably makes no difference: even if there WERE more so-called standards or laws to regulate their behavior, such laws would be widely overlooked and uninforced by Bush's laissez-faire failed policies. Hey, the free market will police itself, right?

Sad that Americans are getting some taste of the kind of corruption and greed that characterized the business ethics at the turn of the 20th Century, with robber barons, calls for reform from muckrakers, etc.

shtove said...

No fiduciary duty? Appalling. Surely the courts can step in there through the principle of the duty of care - or would that be considered a bit too "socialist"?

Anonymous said...

"Why doesn't congress regulate the out-of-control-and-corrupt mortgage brokers?"

Are you serious?

What do you think all of the campaign contributions are for? They get rid of the contributions to pols and the army of lobbyists presently sacking Troy (er Washington) would die!

Hayley said...

It's appalling that anyone can earn that kind of salary just moving (other people's) money around.

As to the 14 point type, it'll make no difference. We don't have the resources to make people money savvy (just like we don't have the resources to mitigate the effects of poverty or get them off drugs). In other words, say you did try to teach 'caveat emptor' as a part of school curriculum. Just who are you going to pick to teach children to guard against, which industry, sales people in general?, managers? Unwind that thread in your mind and see where it goes.

Prevention is always your safest, cheapest bet (though it brings it's own set of problems with slowing things down, but I'll take those consequences over cleaning up post-trigger pulling messes -- e.g., Iraq War).

Also: A Sunday note to Keith for another week of keeping us entertained. Thinking about doing a anything is easy; delivering (day after day after day) is always absurdly difficult.

Anonymous said...

Face it, there's nothing like a good screw!

Anonymous said...

Worse they don't even know what the term Fiduciary Duty means.

Natural Eyebrows said...


"Duty of care" is a lower duty than a fiduciary duty. It might help somewhat if a court found that a mortgage broker owed a duty of care toward a borrower. Mortgage brokers will tell you they are agents of the lender, and therefore their duty is to the lender. As to the borrower, they have a duty to disclose, which is met by filling out the Good Faith Estimate form and the HUD-1 form. Is there any duty beyond that? Good question.

Frank said...

I say let's return to the Constitutional requirement for voting:

You must be a landowner to vote in the United States.

Meaning OWNER who owns free and clear, not a DEBTOR. Homedebtors would not be permitted to vote under the original Constitutional requirements.

I think that would create a return to common-sense candidates instead of the shysters who fill Congress today.

Anonymous said...

People expect the government to "protect and help" them. That's exactly what the YSP was supposed to do - promote homeownership to low income families by allowing the broker to charge $0 upfront and get paid on the back by the bank.
Sounded good in theory but obviously it backfired. Just goes to show that not everyone should own a home. It's harsh but probably true. If you can't afford to pay broker fees, closing costs or come up with a down payment then you probably can't afford the house at all. Government should just let normal market conditions apply and stop trying to promote the American Dream of home ownership. Isn't that why it's called a "dream" - and like most "dreams" its not so easily attainable?
As for more regulation, government interference is what got these people in trouble. Besides, most don't have the financial knowledge to understand disclosures, even in the simplest of terms.

Anonymous said...

How about mandated public service ads paid by the mortgage companies?


"Your mortgage broker is a somebody who makes commissions selling mortgages.

His paycheck is bigger when the bank makes more money, and you keep less.

His paycheck is bigger when there are hidden fees that you pay inserted in the mortgage.

You get a mortgage once every few years. Your mortgage broker does this dozens of times of month and is very skilled at making bad deals sounds like good deals.

Your mortgage broker gets paid up front to close the deal.

When you have problems making the payments later, it is only your problem, and the mortgage broker will do nothing to help.

When they say they will negotiate to get the best deal from many banks they mean the best deal for them, not the best deal for you.

Licensing requirements are a joke, and the industry contributes large sums to politicians and lobbyists to keep their lucrative business going at your expense.

Mortgage brokers sometimes falsify documents to get loans that they shouldn't, and even do so without your knowledge.

If you sign, then YOU, not your broker, are personally liable and may face Federal felony prosecution and imprisonment for fraud.

If they say that they are one of the honest ones, they are probably lying."

Anonymous said...

Mortgage brokers seem to be the new scum of the earth.Low lifes,slackers who do anything for a buck.Look at this winner.He even has a myspace Imagine finding out your mortgage broker is the REAL PUFF DADDY.Read his profile.If you like to blaze this the movie for you.Minor in partying.Favorite movie- Dazed and Confused.It goes on and on.I was laughing so hard at this guy.This is the epitome of the mortgage brokers we describe and laugh about.Do a feature on him so nobody misses this.This is funnier than the mortgage broker hottie.At least she looked good.HAHAHA!!!Oh !It gets funnier!He owns the mortgage. company!LOL!!!!!!!!!! Go for a great laugh at Scott Lushings expense.ROFLMAO!!!!!!!!!

Anonymous said...

I think one Court just ruled that mortgage brokers have fiduciary duty . Realtors have always had fiduciary duty in their codes .

Anonymous said...

I think there are general business laws agains a company giving verbal promises they can't keep or committing fraud in the course of a business transaction or contract . It sets the stage for a voidable contract or bad faith business practice and other laws that apply to all industry .

You have to keep in mind that these mortgage companies were cheating the investors from the secondary market also by their fraud and they were agents for Wallstreet funds .

Hayley said...

When I think of gov't regulation, I don't think of hand holding, I think of passing laws that make sure noone takes risk out of the free market equation. In short, ya dance with those that brung ya: make the loan, keep the loan, make the investment, take the risk of loss.

I'm kind of sick of being sold the idea that free markets are a one way bet.

Anonymous said...

LOL The should be featured.This is the type of person that I imagine is involved in mortgages.I read the profile and was very surprised he had a link for his company.Isnt he afraid he his customers might question his character.Very strange.

turdly said...

Brokers can edudate you but they can't make you not stupid. Go directly to the lender or shut up.

You'll just keep going from broker to broker to broker until you have enough edudation to complete the lie and get the loan.
Brokers are not financially responsible and shouldn't be. They rang up your order, you ate the cheeseburger. You don't sue the clerk at McDonalds, you sue McDonalds.
Unlicensed federally chartered banks are lenders and write the guidelines and then lend the money if you fit withing those guidelines.
Brokers simply sort through a myriad of guidelines and, after adding as much as they can for themselves, JUST LIKE EVERY OTHER SALESPERSON YOU'VE EVER MET, ring up your order and pass it on to the lender.
Why can't you go directly to the lender? You can, but they are really really hard to lie to. Why doesn't everyone just walk into BofA or Wells and get a loan, because you can't lie to them!

Go directly to the lender, or shut up.

Anonymous said...

People go to a mortgage broker because they are too lazy shop around for themselves. If you're going to bend over that easily then you you deserve to get screwed without vaseline.

Anonymous said...

what do an appraiser, real estate agent, mortgage company and an alien who crossed the border have in common? They all have done an ILLEGAL act, except that the former are a bunch of white folks perhaps and the latter is a brown skinned poor Mexican.

Anonymous said...

But the point is you can't commit fraud in the course of business .

The Secondary market didn't pay these mortgage brokers to screw the customers and commit fraud that would end up costing loan investors millions and millions .

The loan investors paid the mortgage broker to process loans and be a middleman between the borrower and the loan investor .

The investors wanted the loans within the guidelines laid out and they wanted accurate appraisals .

What loan investors got was fraudulent packages and inflated appraisals made to look like they conformed .The loan investors (bagholders ) got perjury from the borrowers/lenders agents and inflated appraisals and cash -back-schemes that understated the risk of loan packages .

Lenders ( the final lenders putting up the funds that buy the loans from mortgage brokers )don't like to make loans to people who can't repay .

Was there a problem with how Wallstreet was rating this junk fraudulent loan paper? .....Yes .

One of the reason that bagholder lenders didn't spot the fraud that was going on was because real estate was going up so not many foreclosures were coming up that would alert them . It still doesnt excuse the abuse in lending and the breach of duty for lender to underwrite and prevent fraud,and certainly to not be fraudulent themselves as agents of the funding lenders .

Its more clear that the high commissions paid to process and fund a certain type loan caused loan agents to commit fraud with or without the borrower committing perjury /fraud also .

Its a very serious crime for loan agents to change documents that borrowers submitted or help borrowers commit fraud or bribe or blackball a appraiser if they don't inflate a appraisal beyond true value .

In the medical profession ,it would be the same as taking out a kidney that was healthy ,just to make a buck .

bill said...

my comment this has happen to me,my appraiser state the value of my home at$68,000 and state there was new work done to the home as new roof plumbling siding windows doors flooring bathroom and get this took pics of the inside of some one home to use on my appraisal not my home well the loan officer he get a big kickback on my loan and now i am in foreclosure,so the lender send out appraiser he state the value at $14,000 $54,000 less than it was 9 months ago and i would have not know any of this if i was not in foreclosure, what can i do about this please help e-mail

turdly said...


So you think the house is the problem? Dense. The problem is you're not paying your mortgage! Mortgages have very little to do with the house. It is just atool to make sure the bank doesn't get screwed. BY PEOPLE BUYING SHACKS AND THEN NOT PAYING FOR THEM. It doesn't matter waht you paid, it doesn't matter that the house is in shambles, what does matter is that you are not living up to your commitment, and paying the mortgage. You just want out you crybaby. Pay the monthly payment and please try to justify to us why you think you shouldn't pay the monthly note you signed up for. You didn't get screwed in any way, you're screwing the lender. I just hope you're not in charge of anything where you work. Lord help us if you're with the church, I can imagine the type of information you dispense.

Anonymous said...

The problem is not mortgage brokers but greedy INDIVIDUALS who make a bad name for honest working people. I do believe that if you are gullible that you will fall victim to these individuals. One way to try to limit theses consumers who are taken advantage of is to educated people on the loan papers and process, whether though school, pamphlets maybe even a mandatory class. It is the consumers responsibility to read and understand anything they put their signature on. If you do not understand then take a minute to ask questions and do research on any terms you do not understand. There comes a time when an individual has to take responsibility for their own self and to stop putting the blame on someone else.