Mortgage Brokers to Blame? Yeah Right!: Mortgage Industry
OK folks, the following story from the Los Angeles Times cracks me up and makes me sick to my stomach at the same time!
- U.S. Taking Aim at Brokers by Los Angeles Times (10/04/07); Peterson, Jonathan
Several pieces of legislation that addresses the problems in the mortgage industry are expected to be introduced soon in the U.S. House and Senate, and many of the proposals will target mortgage brokers. Bills being drafted by House Financial Services Committee Chairman Barney Frank, D-Mass., and Senate Banking Committee Chairman Christopher Dodd, D-Conn., could ban yield spread premiums, which brokers earn for getting borrowers to accept higher interest rates. Other proposals call for the creation of a registry of licensed brokers and the appointment of a czar by President Bush to oversee foreclosure-prevention efforts, as well as the easing of Fannie Mae and Freddie Mac's mortgage portfolio limits. Brokers worry that banning yield spread premiums will boost closing costs, as some borrowers opt to lower upfront costs by accepting higher interest rates, and insist that licensing and registry requirements also should be imposed on banks and mortgage lenders. It remains to be seen whether the bills will include provisions making the investment firms that securitize mortgages accountable for problem loans. (end of story)
Typically when there is a problem that no specific person or group is directly responsible for, a scapegoat comes about. For those of you that may want more clarity on the term here it is.
- Scapegoat
Scapegoat refers to the deliberate policy of blaming an individual or group when the fault actually lies elsewhere. It means blaming another group or individual for things they did not really do. Those that we scapegoat become objects of our aggression in work and deed. Prejudicial attitudes and discriminatory acts lead to scapegoat.
The problem I am referring to is the Mortgage Industry. The scapegoat I am referring to is Mortgage Brokers.
The part that makes me laugh is that I continue to hear over and over that Mortgage Brokers are to blame for the mess that the Industry is in. Now we have the US House and Senate targeting Mortgage Brokers. Let's make one thing VERY clear! A Mortgage BrokerCAN NOT exist without a funding source i.e. Mortgage Lenders, and Mortgage Banks. These Mortgage Lenders and Mortgage Banks include Countrywide, Bank of America, and US Bank among others. There are also several other of these large Mortgage entities, roughly 161 of them, that are what one of my colleagues calls IMPLODED! So without these funding sources most Mortgage Brokers could not even fund one loan much, less than number it would have taken to be responsible for the mess we are in. It is that simple! So how can you even begin to blame Mortgage Brokers, without laying part of the blame on the sources that fund them. These Mortgage Banks set forth GUIDELINES which state that if your Borrower's scenario falls into these guidelines you can BROKER the loan to us. Done!
The part that makes me sick to my stomach is that Congress may see Mortgage Brokers as part of the problem. I am sorry but the government should not be passing legislation on items that they do not no the inner workings of.
- Case in point, Nevada Assembly Bill 440 that was targeted against Stated Income and Low Doc Loans was simply meant to target fraud in association with these documentation types. I know this because the Owner of Five Star Mortgage is the President Elect of the Nevada Association of Mortgage Professionals which employs a lobbyist on behalf of Mortgage Brokers in Nevada. This lobbyist took part in the negotiations on this bill with lawmakers. Once the bill came out, it was ambiguous! To make a long story short, we are now severely crippled in our ability to do these types of Mortgages. The State Assembly has acknowledged that the written bill is ambiguous but because they will not be in session for two more years there is nothing they can do about it!
So now back to my sick stomach,if we have Congress passing legislation about Yield Spread Premium or any other part of the Mortgage Broker process we could see major changes in the Industry. The problem therein lies that, with Mortgage Brokers hands tied, that would shift a majority of the business to Mortgage Banks and Lenders Loan Products. This would reduce diversity and competition in the marketplace and we all know what happens when there is no alternative to a product. Can you say Big Oil?
With all of that said we must be careful who we blame for what AND let's regulate ourselves!
Your mortgage partner for life,
Rey "Steak Dinner" Gallegos
Senior Loan OfficerFive Star Mortgage
Website: http://www.steak-dinner.com/Mortgage Loan Resource Center: www.milliondollarwiki.com/mortgageloansYour complete community mortgage broker Approved in NV, CA, UT, NM, AK, and FL
Proud member National Association of Mortgage Brokers
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My son was one of the hundreds of brokers prosecuted in the government's mortgage fraud crusade. He and two partners bought and rehabbed foreclosure properties in the Kansas City area. They kept many of the properties and rented them to Section 8 tenants. The rest of the homes were bundled and sold to investors as income properties.
All of the loans were performing well until an investor who'd purchased about 20 of the rental properties was arrested on drug charges. When he was taken into custody he stopped paying on the loans and they went into default. He apparently helped the government with its mortgage fraud crusade by offering to testify against my son and his partners in exchange for a lighter sentence on the drug charges.
I mention all of that to make clear my son wasn't using straw buyers or cooking loan apps to trick lenders. He strictly followed the lenders' instructions by furnishing accurate credit scores and debt ratios and, as instructed, leaving blank other lines on the loan apps (such as source of down payment). The lenders' loan officers said their software would flag any crucial missing information, which could be added later if needed. They cautioned my son that putting non-crucial information in the no-doc loan apps might raise red flags that could needlessly jeopardise approval.
My son paid his lawyer $270 to review each loan transaction.
Then the government entered the picture. All of a sudden the lenders were portrayed as victims. My son was cast as a loan hustler and front man. The missing down payment information became "material omissions" in a conspiracy to defraud lenders.
My son initially rejected a plea agreement allowing him to plead guilty to two counts: wire fraud (faxing an app containing "material omissions" over state lines) and money laundering (depositing his commission checks in his bank account). My son resisted, noting he'd paid a lawyer to make sure he'd done nothing illegal. Prosecutors responded by threatening to file a hundred fraud and money laundering counts unless he signed the agreement.
Facing a plausible 30-year prison term if he lost at trial and the burden of raising upwards of $250,000 for a trial lawyer, my son took the deal.
I suspect many, maybe even most, of the hundreds of brokers, appraisers, lawyers and others being rolled up in the Justice Department's mortgage fraud crusade were, like my son, merely doing business as usual. And that, in my admittedly prejudiced view, supports your contention that loan originators are prime scapegoats in the nation's credit and subprime mortgage crisis.