The Dogs Bark, but the Caravan Keeps Rolling

Last month I took the deposition of an independent mortgage broker who did business in our area until a couple of years ago. This broker is indicative of a breed of participant in our business. All came in for the good times, in title insurance, real estate, and finance, and almost all are gone now. I learned that this particular broker’s office did business in a large room, divided into cubicles in each of which sat an agent whose purpose it was to sell mortgages to home buyers. There were several dozen of these agents, all of whom operated independently, and all of whom were paid a commission depending on the number of mortgages sold, and the profit each agent made for the “house”. There was no supervision of what was said in each cube, and at the end of the day, nothing mattered except the profit made by each agent on the mortgages sold.

I got involved in this because the houses of borrowers with previously good credit ratings were being foreclosed, and I did not understand why they would have signed such stupid mortgages. The “deals” had escalating rates, were financed for well over 100% of value, or were sold at higher than customary interest rates.

Many of these borrowers signed mortgages at higher than necessary initial rates simply and only because the higher rate created more commissions for the agent.

Things haven’t changed. Some of the players who sold these mortgages are now on the other side of the field, wearing different uniforms, but still working on commission, selling services, without meaningful and ethical supervision, and often acting far more in their own best interests than those of their clients. Some now act as “mortgage workout specialists”. They advertise their expertise as “one-time mortgage industry representatives” who for a price, can fix payment amounts, foreclosures, and previous defaults.

Many of these people will offer to take title to your property and “hold it for you”. Some want to be paid up front in exchange for a promise of success modifying your mortgage. It’s more than a little galling that consumers find their way to the same people who profited the first time around by hyper-selling, now profiting by telling mortgage companies whatever needs to be told to modify the stupid terms they sold in the beginning.

Some advice: Don’t convey your property to anyone offering to help. Don’t pay anyone a fee in exchange for a guaranty that a mortgage company can be made to look the same fool going out as they were willing fools going in. That might not happen. Don’t distort the facts getting out of mortgages as some people did getting in. That’s as illegal now as it was in the beginning. Don’t accept terms that don’t make any sense to you, and read and question what you see. Don’t compound yesterday’s anxiety to make the deal quickly by today’s failure to read and question the solution and it’s price. The same people who took advantage by over-selling and mismatching borrowers with mortgages will play to the same audience by promising things they cannot predictably deliver.

Be careful. Talk to your lawyer. If he or she can’t help, you will at least have shared your pain with someone who cares.