Mike Mueller - Builder of Engagement

Main blame was the easy cheap money.  Remember houses always go up in value, NOT.

You are right. There is plenty of blame to go around. It would be hypocritical for us to not shoulder that blame together.

Ron Lambright
Regional Director
HOPE USA
www.hope4usa.com
ron@hope4usa.com

You are right. There is plenty of blame to go around. It would be hypocritical for us to not shoulder that blame together.

Ron Lambright
Regional Director
HOPE USA
www.hope4usa.com
ron@hope4usa.com

Mike,

This is a great post.  This all comes back around full-circle to greed:  greedy investment banks, greedy lenders, greedy LOs, greedy REAgents.  This implosion could have been easily avoided by normal documentation and amortized or interest-only payments (no negative am!).

 

Mike,

I agree there is plenty of blame to go around. How about some of the national builders with thier own in house mortgage companies?

You know I don't know the real estate agent in your example and I certainly don't want too, but I can tell you that in my experience I have never asked a mortgage professional to increase earnings of an applicant or any other falsifying of loan documents. I am not suggesting that all money lenders do this type of thing anymore than you are suggesting that all realtors do. What I really want you to think about is why so many lenders broke so manuy rules that are on the books regarding this issue. Also when the bank hires an appraiser, they should not be coercing them to appraise properties just to just to support inflated values.

There are many to blame it just comes down to who you point the finger at as the scapegoat.  There are the investors that offered "out of the box" programs.  Also the LOs who pushed them like a salesman.

I partially agree taht agents are to blame.  The market determines the value of a house and if buyers armed with these programs were able to bid up listings then that's how it is.  RE agents and brokers have to deal with the market and have to go with the flow to help both buyers and sellers.

Mike - I disagree with you on this one. Do you know how many first time buyers came to me already pre-approved? Everyone and their brother had a "friend" in the business. How many of their "friends" still do mortgages?

How many buyers let their fingers do the walking after they were turned down not by one, or two loan officers, but many. They just keep trying until they found one that said yes.

I can't speak for other Realtors, but I always give my clients 3 mortgage lenders when asked for a referral. I don't do mortgages. If that lenders then calls me and says no can do, then it's no can do. Period end of story.

 

Mike,

Recently I met a Realtor after the subprime bust.  First think out of her mouth was that she was looking for someone who could get her bad credit buyers approved.  She had someone that could get the good stuff done.  Needless to say I didn't like her approach and have not followed up with her.  Realtors talk about their ethical code but they have bad apples too.  I don't know how many times I turned people down to see them get the house, because their Realtor took them to another lender.  I wonder how that worked out for them? 

You make a good point, but I have to say Lenn was right. 

I work with only refer to reputable loan officers and depend on their ethical, professional work.  I do not see the client's credit report or application nor do I want to.  I do not shop for the answer I want, I want the truth!

John - I know I'll catch a little heat here.  Can there be a main blame?

Ron - That was good enough to be repeated (LOL)

WI - Thanks - everyone is to blame

Chris - them too!

John - Maybe the Agent didn't specifically ask to change their income, maybe they just asked "Is that all they are qualified for?"

Compass - My point was so much that agents are to blame as much as I disagree with Lenn that Agents are NOT to blame.

Sandra - Thanks for the visit!  Yeah, borrowers are to blame as well.  Once again - I contend that no one is free of all guilt.  Payment Option ARMs were sold to so many for the wrong reasons.  I've had clients go elsewhere (on their own) because I didn't want them to do a Neg Am Loan - they went next door and got the 1%!  Woo Hoo! I've only done 4 POA in my life.  I'm not a saint, it just wasn't the right loan for the right person.  Conversely I was just reading this:  Downey Savings Paid Brokers up to $50k Commission ON EACH LOAN! Man, I wish I could have made $50,k in rebate.  But I digress.  This isn't about me.  This isn't about you.  It's not about what we do or what we didn't do.

Mike,
But still.......the final decision to make or not make the loan is with the lender, not the agent. 

I too read with great interest what Lenn Harley had to say...

Folks, let stop the blame game... Are there that many agents out there that put the "screws" to a mortgage officer because the people didn't qualify??  I may live under a rock but come on... trillions of dollars of loans weren't made because a few rogue REALTORs got p--sed off at the lender because the buyer didn't qualify...  If you see the stats of the loans taken and Given in 2005 you'll see that the refinances OUTSHINED purchases by quite a bit...  In fact, many of the short sales and foreclosures I am seeing are people who have owned their homes for over 5 years, they refinanced, spent all the money, or bought a new one and dumped the old one.. no REALTOR involved.... only lender.   Pretty sad...

But I am not blaming... look at the facts... I was a lender for over 15 years before I got my real estate license.  When I was in lending I was a loan officer/producing sales manager and VP for lending in AZ... but prior to that I was an underwriter, prior to that a processor.  We had guidelines... set forth by Fannie and Freddie... mortgage backed securities that meet the guidelines are purchased by Fannie and Freddie and then sold to investment companies hedge funds etc etc.  So... although Fannie/Freddie are not government regulated, the Greenspans of the world are appointed by the Pres... What does the Fed do when they want to stimulate economy??  Provide easy money..  Now, I don't know who came along and told Fannie to relax the lending criteria do you??  Who told the Indybanks of this country that it was ok to lend money without any real collateral??  There have been 10 boom and bust cycles in this country since the early 70's... 10 with this being the 10th... do you think there is history to be learned from the previous cycles??  Its a fascinating.. and we have come out of it in the past and we will this time...

So... lets not all be 3rd graders and start the blame game.  When this all passes we have to work with each other... lets blame Fannie and Freddie if we have to..... whoever they are. 

Gloria

 

You're both right.  How about that? 

I read Lenn's post and about a 100 comments or so before I commented.  I agree with Lenn that ultimately it is the underwriter that says yes or no.  If they had all said no, then the mess would be less (still there, but lessened)

Did agents participate in making the mess worse.  Yes.  I sold a home in the peak that did not appraise.  The agent and mortgage officer shopped the appraisal to three different appraisers until they found someone that "gave them some love" (mortgage brokers words) on the appraisal.

The agent knew about the low appraisal and rather than writing an addendum to adjust the purchase price participated in finding an appraiser that would come up.

Utlimately the underwriter could have said No, the original appraisal was low, we won't lend.  So Lenn is right in that had they stuck to good lending practices situations like this one would not have happened, but agents did help to perpetuate the cycle by not acting in the best interests of their clients.

I agree with Lenn that cleaning up admission requirements for real estate agents is what our industry needs to do.  Our lack of educated and well trained real estate agents did contribute to the problem, but lenders have to be responsible for their own business practices.

the finger pointing and the blame game have been interesting to watch. There are MANY reasons for the "mess" we are in. Nice to be able to follow different points of view. Thanks, Mike.

Mike, I love the post. But the deal here is everyone trumped the system; broker, agent, borrower, lender, securitizers, rating companies....literally everyone was in on it. And I am about sick and tired of hearing, "well, we just did what we were told".....that is C**P! Good lending standards have been around and in place for years and doing the right kind of lending is not rocket science. It is based on solid risk based principles that were completely abandoned in the last 6 years. Shame on everyone!

Thanks for the post!

Bo

BTW, I believe that everyone deserves the right to have a home, but to gain that right, certain requirements must be met first and people must have patience to build credibility.

Jimmy - We've all heard that one haven't we?

Randy - My point isn't that this is about you.  It's an industry.  Accepting blame for an entire industry doesn't make you guilty by association.  If it did, I would be guilty as all those LO scumbags I write about.  My industry is chock full of scumbags.

Cynthia - Yes.  Well actually it's the underwriter.  But yes the final check and balance is the Lender.  I never said it was the Agent.

Gloria - Loved the 3rd grade reference.  Thanks!  Good points.

Melina - Yes we are.  And I'll say it again, This isn't about Lenn personally.  She's probably up on a pedastal higher than 99% of the people here.  This is about the indutry and the forces that drive sales.

Nick - I though my pont of view was widely held.  I was surprised by Lenn's POV.

Bo - Thanks for the love!  I agree with you on the right to own.

Have you seen Mike Jaquish's post that says if someone tells you, "there might be a way around that..." RUN!

Well - I don't agree with that either.  If you have a borrower, and you're asking me if there's a way to make it work - and there IS a way to make it work - do you want me to tell you?  Because I can for darn sure GUARANTEE that if there's a way to make the deal - the agent has ALWAYS been ALL ABOUT finding out how to do it!

How many times has a "new loan officer" been to see an agent and the agent pulls out a deal from the "bottom" drawer just to see what the "new guy" can do???  If the deal's REALLY dead - you've been told by other lenders - WHY ask the "new guy???"

You make a VERY valid point - there are plenty of places to point the blame.

The lenders are the keepers of the proverbial gate, they hold the key to the kingdom of cash.

True, some agents, just as some clients, will try to persuade the lenders as best they can, to reconsider their assessment of ones credit worthiness.

I really don't see how that equates to it being anyones fault other than the lender they gave the money, or the buyer that accepted it.

It doesn't appear lenders are now bowing to this horrible strong arming by agents or clients, so why was it so difficult to say no (and stick to it) then? They had the resources and rules in place to prevent this, and disregarded them.

The loan mills were churning out loans like mad, and they would have done so with or without a borrowers agent being part of the sale. I can assure you, people that had no agent at all, had no problem borrowing money. Do you really think having a Realtor made a difference when it came to the loan? Its preposterous.

Michael Brio,

With all due respect (I really mean that)...

Strong-arming absolutely WAS alive and well in this business for the last 5 years or so. Ask any loan officer. Realtors WERE testing every mortgage rep and company to see if they would do the deal or not. If not...pass....move to the next guy...and the next and the next and the next. Stop only after you got the deal made no matter what ethics were sacrificed along the way (by all parties involved) or whether the interests of the buyer were ever a concern to anyone, Realtor included.

If YOU are the kind of agent who did NOT do this strong-arm tactic, then great. But for any agent to vehemently deny that it was going on is the most ludicrous thing I've ever imagined reading.

The strong-arming has stopped....for two reasons.

The "ethically challenged" agents had a tough time staying in this business and many are gone (thankfully)...and the lending industry has tightened up so much that you can't just go down the street and get the loan funded anymore.

If you could...the strong-arming would still be present...and many, many, MANY Realtors would be guilty.

By the way...you're right that many buyers who had NO agent were also getting funding on loans because of their own poor ethics, along with their willingness to do whatever it took to get the loan. But I'm guessing that the percentage who bought without an agent is miniscule. It's just not the norm. MOST of the homeowners facing the wrath nowadays bought WITH an agent...and even though the lender had the ultimate responsibility of saying yes, the Realtors were relentless in their pursuit of the company that would do whatever it takes, under any circumstances to give them their commission.

Why the Realtor community won't own up to at least being a part of the problem is beyond me. I've never witnessed this much "I had nothing to do with it" defense mechanisms in my life. Talk about denial!!!

In fairness...perhaps we're fortunate enough to only have the good Realtors here at ActiveRain, especially if the bad ones are out of the business now. I guess that's a welcome thought. But it seems the prevailing sentiment around here is that it's simply insane to think there are/were any agents out there who don't do their jobs well.  

All of us know better than that. But if you're comfortable defending them, so be it. That's your right.

I can't...and I won't.

Dave

I just posted a comment on the other blog that this one is replying to.  I agree that agents have a responsibility to their clients to become more informed about loan programs and lending practices.  It is also my personal goal to try to sit down with my clients and work out a budget that they can live with.  I can tell you that I have had lenders give them a pre-approval amount and not go over the payment amount for that loan.  The buyer then just wants to look at home and buy one.  However, without the proper information, they could be making a huge mistake.  I always talk budgeting with my buying clients and tell them to sit down and go over their monthly bills and make sure that they can make their mortgage payment comfortably before they decide on their loan limit.  I always tell them this, "Don't let a loan officer set your limit for you, you have to live with this payment for years and you have to be comfortable making it."  So what if they are preapproved for $500K.  They may only be comfortable making payments on $300,000 due to the fact that they have day care, private school bill, etc that the loan officer did not even ask about.

So, we all need to be more proactive in helping our clients make better decisions about how much they can afford when buying a home.  I want to build lifetime relationships, not just collect commissions.

Why does anyone have to be blamed?  Here we are, now what are we going to do about it?

David, I don't for one second believe that if you removed Realtors from the equation things would have gone differently. It's only because Realtors made money off the sale people are pointing fingers at them. Do you think FSBO's have not fallen into this mess?

The bottom-line irrefutable fact is that banks sell secured bonds backed by these home loans. THEY have a legal (not moral) obligation to follow the rules, regulations, and laws that govern lending. They are federally insured, and that comes with huge obligations on their part. They disregarded all of that, and paid themselves huge bonuses and salaries in the process.

There is absolutely nothing Realtors could have done to prevent any of it from happening, there is an incredible amount of things banks could have done to prevent it, and should have. This absurd notion that Realtors were putting some type of Soprano tactics on the poor little lenders is silly at best and ignorant at worst.

To say "banks wouldn't have loaned all that money out if those mean ol' Realtors wouldn't have been so tough on them" is insane. Give me a break.

So at the end of the day one fact is clear, Realtors could not have stopped this from happening, Banks could have and were obligated to do so. They failed in that responsibility. That's not anyone's fault but their own, and many of them will go to prison for it.

David, heres an example of the type of lending schemes going on in those little mortgage companie that we "pressured". This is an actual letter sent to a lender requesting a short sale. the names have been changed. (sorry it's so long Mike) 

Jenny McCann                                                                                                                                 5/31/06

Loss Mitigation Specialist

Ameriquest Mortgage Co.

Re: Request for Short Sale of loan(s) # 0087836xxx and # 0087839xxx

PLEASE BE AWARE THAT THIS TRANSACTION IS UNDER INVESTIGATION.

I am requesting an approval for a short sale on the above 2 loans (1st and 2nd) associated with the property at xxxx xxxth Ave SE Bellevue, Washington 98006.

I, Marcy the sole borrower listed on both loans, worked part time as a loan officer at xxxxx Financial Group, owned by Joe Smo, President and CEO. In February 2005, I was offered a fulltime position as the loan processor for company VP, Julian Crook. which I accepted. While there I observed him doing several things:

 
* Utilizing a "stated loan" option where the lender allowed the buyer to state their income and/or assets without written documentation, pay stubs or W2's to verify the information.

* Transferring money into the buyers accounts to meet the lenders' reserve condition.

* Creating/changing bank statements to show income history.

* Using "Platinum Computer Co", a fictitious company for job verfication (Julian had purchased a business license and had a 1 800 #, The lender would call the 1 800 # asking for the verification from the Co. and they would actually be talking to Julian who would verify the information).

Then Julian brought up an opportunity for me that he said he used a number of times. He would find property to buy, help me get a loan on the property, he would pay all mortgage payments and cost of repairs and renovation, and then resell the house. I would get $10,000.00, after the property sold and my credit score would increase due to the property value and payments. I told him I was possibly interested.

I saw it as an honest, profitable real estate business of buying and ‘flipping' homes. With (my) credit and Julian's abilities in real estate and sales (once I saw one of his 2004 bank statements it showed one month deposit of over $100,000), I saw it as a very viable and credible venture. I learned many months later, that these types of loans/schemes are referred to as Straw Loans, and the person who's credit is being used and buying the property is the Straw Buyer.  

On September 22, 2005 I signed the papers for the property. I "knew" it wasn't right, but I trusted both Julian - and the company, I looked forward to doing the work needed and building a new little enterprise. 

Unfortunately, Julian did NOT inform me that:

1) He was a fugitive from the law, wanted in both Nevada and California for Parole Violation. (Soon to be picked up by a US Marshal and sent back to Prison in Nevada).

2) That the appraisal, paperwork and loan he was putting together for the purchase of the property was overstated- and that the whole ‘venture' was a front in order for him to put together yet another fraudulent loan.

He then proceeded to do several things.

Then early October 2005: Julian was picked up by the authorities and extradited to Nevada and then later to California. Not knowing, I - and everyone - was shocked. Joe immediately pulled me into his office regarding this loan. I still had no idea that it wasn't an honest appraisal and loan; but it was approaching the first mortgage payment time (which Julian had agreed to pay).

Joe MADE ME promise that all mortgage payments would be made on time, he was very clear that he did not want another loan foreclosed on. I promised, as I had no idea of what I had gotten into. Joe assured me that if I couldn't make the mortgage payments, he would pay them (he made one month's payments).

I finished processing and got funded what loans we had in the pipeline, but then found myself without a job (as my boss was in prison), and I had/have my own personal residence, and expenses to handle.

I (tried) putting the house on the market, but was not able to get an offer of the necessary total (the amount owed to you the mortgage co) as again, the loans are $80-120,000 more than the property is actually worth.

Julian (even from jail) and Joe, the co. both assured me that the house and all expenses would be taken care of. So to keep up on the obligation, in time I put $20,000.00 on my credit cards (which are now also in payment hell).

Julian was released in January or February 2006, out on parole through the Prison System. Still reassuring me that one of them would handle the situation (and my evaporating money supply) I kept on until the end of March 2006 when Julian and Joe both informed me that they would NOT be going forward with their agreements and/or promises with regards to handling the payments, expenses and/or purchasing the property to get it out of my name. Leaving the property, loans, expenses and the credit card debt on my shoulders to handle.

Once I finally "got it" and realized that I had been taken, and that the property was not sellable at the needed amount, I stopped the payments. I needed the funds just to be able to make ends meet for me personally (which they aren't).

I went to authorities who found sufficient evidence backing my allegations and it is my understanding that the authorities are taking this situation VERY seriously and that the investigation is going forward.

It is alleged - and investigators are following up on:

1) That Joe, owner, President and CEO of XYZ Financial Group, Inc. knowingly allowed and participated in, the use of fraudulent (pushed) property appraisals. He was aware, and used people that were interested in either purchasing these properties or (by using their credit) participating in what was presented as "house- flipping".

Then allowing the processing at XYZ, of manufactured loan documents to fit the scenario, in order to receive fraudulent funds at closing (the difference between the seller's price and the pushed appraisal price).

2) That individuals involved in the handling of the appraisal, loan, (lender side) processing - knowingly manufactured their paperwork to show values more than the property was actually worth and/or manipulate the system in order for the loan(s) to close and be funded.

3) That the escrow co. knowingly, at minimum, dispersed unauthorized and illegal check(s). In this/my case: $72,000+, to Julian, the loan officer and VP (my boss).

I hope that you will view this situation, for a short sale, favorably. Know, that NO ONE is more sorry and regretful about all of this than I. This has almost destroyed me literally, and financially. If approved, I know that it would be a bright light in a very, very dark situation. I can't tell you how much I would appreciate this.

Thank you so much for your time and consideration. I look forward to hearing from you.

Marcy

Come on Michael,

I think this guy is just trying to defend the mortgage industry from the agent's blog that attacked them first.  I agree with you that this is all a bit silly, but, we should all agree that REALTORS and lenders both have a responsibility to their clients.  I do personally feel that some lenders really made this market crash much more quickly by refinancing the "spenders" over and over again and not telling them "Hey you idiot, stop refinancing and taking out all of the equity you have built up."  I have personally had the displeasure of helping several people sell their homes because they basically refinanced themselves into a mess.  Payments just ended up too high for them to manage, etc.  So, I too feel that lenders have a little more responsibility for this market mess.

However, we all have a responsibility to try to do what is ethical for the client first, not for our pocketbooks.  Sometimes, we just have to tell them that buying a home now is just not in your best interest.  Then, we can help them get into a position that in the future, they can buy a home and be comfortable making that purchase. 

And lenders do need to turn people down instead of putting them into a future foreclosure situation.  I know that we all need to make a living, but making it like a "shark" is just wrong.

Please feel free to speak for everyone EXCEPT me.

If I get a no from one lender, and contact another... I'm contacting the other to see if they can do the loan.... knowing there are different programs, investors, and debt ratio margins... NOT to ask them to fudge the numbers or do something unethical or illegal.

Cameron Novak
The Homefinding Center
Corona, California

Chat with me about real estate

Michael,

Looks like we're both up late cruising AR for a good debate. LOL!!

I understand the point you're trying to make. But I guess you haven't read all of the posts on this topic as of late. OF COURSE there are bad lenders!!! No one is disputing that. The only thing that's seemingly being disputed is whether there are any bad Realtors too.

The good lenders said no. The bad ones said yes. And tons of Realtors ignored all of the no's until they found the yes, that's all. If that ALONE doesn't make them culpable I have no idea. They looked for the crook who would do the crime, and they TOO profited handsomely!

And I already acknowledged the role of FSBO's. However, statistically throughout the years, FSBO's have only made up approximately 1-1/2% of all real estate deals closed in any given area. So while I agree they contributed, I'm very comfortable knowing that the majority of the problem sales involved a Realtor. Whether they were culprits in those deals is obviously debatable. But they were there...and SOME were absolutely guilty.

I also enjoyed reading the story about the crook named Marcy, who worked for a crook named Julian and a crook named Joe. Marcy, too, basically claims innocence in the whole matter just like Realtors do. I find that comical.

Which reminds me...the only thing missing in that short-sale story....

was the name of the crook Realtor who sold them all of those properties.

I'll guarantee there was an agent "in bed" with Julian and Joe. One who not only KNEW what they were up to, but facilitated it...and made a ton of money during the process.

And forgive me, but the absurd notion that many Realtors were NOT using Soprano tactics on the poor little lenders is not only ignorant, but terribly naive. 

Dave

I suppose we could banter endlessly about what happened and why and who was responsible-

however we live in the here and now. 

After Rome burned it didn't really matter much who had the match.

I do agree that everyone is to blame---I remember a few years ago a particular loan officer at a respected local bank who called me and said that unless my husband (the local appraiser) could met her  demands, she couldn't use him anymore. She wanted me to "talk" with him.  Can you believe that one?  She isnt' in the business anymore.

Mike,

I guess there needed to be a large fire lit today. I haven't seen Lenn chime in but I'm sure she is thinking about what her rebuttal will be. Unfortunately what's done is done. My question is how can two different companies be able to come up with one approving and the other not. And I'm talking logically...we all know it happened but you would think the final approval would be looked at a lot closely if they knew they were denied by the first one..I don't get it? Maybe because I'm generally on the listing end. The bottom line is with whoever made the final decision in my opinion.

I never understood how anyone could be strong armed other than the word greed now and repercussions later.

Very well thought out, and presented!  Thanks for the post!  Great job!

Dave, I'm actually not up late, it's 2:27 here in Iraq, and I just returned from lunch in the lovely 115 degree sun. My point is simple Dave, the banks collapsed because they failed to protect themselves, which was their duty and obligation. When you hold the keys to the vault, yes, some folks will lean on you for loans and favors. However, that absolutely is no excuse for caving in to them. They held the keys, and whom they let in, is on them.

As for the homeowners that defaulted on their loans having Realtors, well, they likely had an escrow company also; is it their fault as well? Agents are part of the process if asked to be, it's not obligatory. Any person can walk into an open house and make an offer without representation.

As for the person that wrote the letter, she turned herself in to the DA and confessed to what she did, I wouldn't call that denial or claiming innocence. She has no immunity offer, and there were no Realtors involved in any of the deals mentioned in that letter. Zero.

  I am very big on taking responsibility...was your headline a "point getter" ? I am not sure that in and of itself, asking another lender is necessarily a bad thing...it can work in reverse you know.  Just when you think all the flakey lenders are gone...we discovered two new ones introduced thru AR that we though initially were "trustworthy." In both cases, had we not looked further, and without some experience, I am guessing most agents would not...had the loans closed neither buyer could eat with the money they had left !

Of course there are unethical real estate agents too. Maybe they were looking for different loan programs. Maybe the buyer was pressuring them. Maybe they were pressuring the buyer. Maybe the loan office 'fudged' an application. Maybe anything. But guess what?

The BUYER is the one who signed his/her pretty little name on the application and mortgage documents. So really, if they didn't understand or think they could pay then THEY shouldn't have signed.

Now, I agree that in some cases a buyer may not have understood exactly what was going on but in most of these present pre-foreclosure cases the buyer was not sure that they could make that payment. Maybe they could but if one spouse lost their job for even a short time they knew they couldn't.

People need to take more responsiblity for their actions. And yes, this includes everyone involved with a real estate transaction. But again the Buyer is the one who is ultimately responsible for signing their name.

As I said on another blog, at age 18 we all become responsible for our own actions.  The banks are responsible for the laws they broke in giving out loans to unqualified buyers, and the buyers are responsible for taking out loans they could not afford and putting lies on their applications.

Thanks for trying to pass the buck but I'm not accepting it.

I'm sure there were (and probably still are) real estate licensees who leaned on lenders to bend the rules to make the deal but I believe the majority of us did not.

Ultimately lenders make the loans, not the real estate licensees.

I echo many of the others in this thread - there is plenty of blame to go around.  To say that Realtors are innocent of any part of this mess would be an incredible leap.  I think it is time to  stop pointing fingers and start working to do the right thing everyday.  When those unscrupolous types are identified, we as a community should deal with them.  This may be in form of a formal complaint to the board, or a group within the township pulling the alleged behind closed doors for some good ole fashioned counseling.

In the end, we are in this hole together.  We can either keep digging, or realize it is probably time to put the shovels down and work together to climb out.

Personally I think this whole argument is a total waste of time. What useful purpose does it serve to throw blame around? Move on already.

Michael and David -    Good stuff.  Love the spirited conversation.  Iraq?  Wow please be safe!

To all - Yes, I am stirring the pot here.  I even said so right at the top.  But I also believe in the stance I took.  One point that needs to be continually restated here is we're not pointing a fickle finger of fate at any single person, we're talking the industry(s) as a whole. 

If your comment starts with "Well, I for one have never..."  You're missing the point.  Take twenty steps back.  Keep going.  This isn't about you.  This isn't about me.  We're both probably much better people than our co-workers.  This isn't about them either.  Let's consider the industry as a whole.

For years I had  "Sleeze Bag Mortgage" operating right next to us.  They were the ones that sent you all that crap mail offering payments as low as 1%.  They didn't have Loan Officers they had "Closers".  The building has thin walls and I could clearly hear the conversations over the phone.  These people would flat out LIE to consumers about the Neg Am loans they were selling them.  They made a lot of money ripping off people.  They are long gone.  The damage they did is with us today. 

Am I a Sleeze Bag because of these guys?  Guilt by association? 

I agree with an earlier comment, let's stop the blame game.  Let's face it, without home owners/sellers, real estate agents and mortgage brokers/lenders there would not be a crisis!

And agents/lenders are still trying to get buyers with good in homes with low/no money down with the grand programs!  While I do feel it too much to ask that every buyer have 20% down, in my opinion, if they can't handle at least most of the closing cost and/or a small downpayment, maybe they shouldn't be buying.  But then, our market would really be bad...  ok, off my soap box.

I don't think blaming any one group will hold water.  There is plenty to go around -greed will make humans do terrible/stupid things no matter the industry.  However, I do think that one giant piece of the puzzle is the brains behind the  80/20 type 100% financing where there was no mortgage insurance?  In the past, all buyers with less than 20% down had to pay some sort of mortgage insurance and there was a reason for that.

I don't know that MI could sustain all the troubles that the market is currently experiencing, but I do think that banks wouldn't be in the condition they are in if they would have stuck to the "rules" and some common sense.

Mike, I like you but your dead wrong. Agents didn't do the loans. Whether or not a mortgage lender felt the need to compromise their ethics or not in order to keep a client is not grounds to place the blame on others who did not and could not write the loans.

We all have to make a stand in our businesses and one either has ethics or one doesn't.

Unless and until Realtors provide loans, there is no case.

Sorry, nice try.

I agree with Gloria Handley comment, this situation did not happen with just a few rogue agents and lenders. Pointing fingers will not make the situation any better. What we all need to focus on is the solution.

Mike, First you are welcome and second, I 200% agree with you on this. In fact, I posted on this very subject yesterday. This is industry, not individual.

Thanks again for stirring the pot.

Bo

 

Judi - I'd love to stop the blame game.  That's so very much more up my alley.  Lenn's post now has 300 comments.  As a featured post that I disagree with, I felt compelled to voice my thoughts. 

I don't have a problem not with the "It was them!" statements.  I do have a problem with the "Look, it wasn't us.  We had nothing to do with it."  There's a big difference between the two. 

• It was the Mortgage Brokers. 
• It was the Lenders. 
• It was Wall St.
• It was the Appraisers.
• It was the Underwriters.
• It was the Borrowers.
• It was the office next door.
• It was My Uncle Fred.
• It was ...                             (yes, also the Real Estate Agents)

Audrey - Not blaming one group.  Blaming entire collections of groups. 

Gena - So what your saying is that the typical conversation I mentioned in the post never happened?  Once again, I'm not pointing at you and saying that you said "Is that all you can qualify him for?"  Ask your favorite loan officer if he/she has ever lost a client to another loan officer over an approved loan amount.  Every Loan Officer has gotten that call. 

"Unless and until Realtors provide loans, there is no case."  is incorrect.  Mortgage Brokers don't provide loans either.  When it comes down to it, we submit loans, the underwriter approves those loans (or declines).  Following that same line of reasoning, Mortgage Brokers are free of guilt as well.

Michael,

Iraq??? YIKES!! The only thing I can relate to with that is the heat. Last week in Southern California we had record breaking temperatures...and of course my year-old Air Conditioning unit went out. Took them 5 days to get the new compressor...and during that time it was 108 degrees outside....and I don't even want to think about how hot it was INSIDE! Unbearable.

You'll find this interesting. I TOTALLY AGREE with you that the banks and Wall Street have the MOST blame. These kinds of loans had no business being created in the first place. Lenn believes (from an earlier post of hers) that Wall Street assumes the most guilt. But how in the world can THAT possibly be? I've never once seen a single securities dealer meet with a homebuyer to have them sign loan documents. That alone makes them not guilty. Is it the government's fault for not regulating things before they got out of hand? Apparently they have no culpability either. How could they? They obviously never met with borrowers to have them sign loan documents. They are both totally, 100% innocent.  ::: smirk :::

And sure...it was the LENDER who met with them, but since the loan simply cannot be made to a buyer if they don't sign the loan documents (no matter HOW unscrupulous the lender is)...I guess it's pretty easy to tell that it was the buyer alone who is the guilty party. NOT Wall Street. NOT politicians. NOT loan officers or underwriters. NOT IndyMac, NOT Countrywide. NOT the agent who found a crook to cozy up to. NOT the appraiser who bumped the value up.

I'm glad that's settled. Wow...it's actually kind of freeing to know that the entire mortgage mess falls squarely on the shoulders of the consumer. Woohoo!!!! Party time!!!! None of us are guilty!! Feels kinda good, actually.

But I have a final thought. You actually defend Marcy because she confessed???? Heck, 90% of criminals who willfully enter "the dark side" in the name of greed confess. That's nothing new. They hope it helps them in their case. She's no different. But she IS in denial if she thinks her guilt is in any way absolved or lessened by writing her letter...and explaining that as an adult she was "coerced" to doing something she WANTED to do. Quick money, higher credit score. LOL...how are you coerced into something you WANT to do?? She's a crook. Maybe not the one who held up the bank, but definitely the one who drove the getaway car.

I did find it interesting that no Realtor was involved in those cases. Kudos to the Realtors who turned those down. But UN-kudos to the agents who were involved with all the rest of them.

It occured to me last night while laying in bed (geeze, I hate thinking about real estate while laying in bed)...that all the evidence I need of "Realtors gone bad" is the monthly DRE Directive that comes out in California showing the ever-expanding list of licensees whose licenses are revoked, suspended, or surrendered voluntarily.

I'm fairly certain if you talk to any of them....their stories will sound a lot like Marcy's.

Stay safe over there.

Dave

Mike, my mortgage broker turned down many loans and none of my folks got caught up in any of these risky loans. I know he turned down many buyers as I did.

The point is...if a buyer is unqualified, they are unqualified and those who arbitrarily gave them loan approval in my estimation had no scruples.

No, I'm not saying that what you said was untrue. I'm sure that you have heard that many times. It's a sane question. And if the buyer continues to look for a loan elsewhere, so be it. The idiot who qualifies an unqualified buyer is the person I have issue with and the underwriter who turns their head to the truth.

We all make choices in life and hopefully we rule with our conscience.

There was/is plenty of unethical people out there on both sides of the fence.  As long as the attitude of "do anything to get people in a house" is out there, problems will continue.  The attitude of oh, they don't have any savings but they have a job is not the right attitude.  Today jobs disappear overnight.  Once the job is gone, so is the money to make the payments.

Excellent post!  I didn't comment on Lynn's post either, but then I found your post and it pretty much says what I was thinking. 

One point that I didn't see you make that I was also thinking is this;  Was it really unethical for me to take a loan application from the burger flipper and when he was disappointed in what the agencies would approve him for, to then find him a loan program that he was eligible for?

If I didn't mislead the investor....as a matter of fact, I filled in the 1003 EXACTLY as they taught me to do and provided the documentation that they specifically required...and I didn't mislead the borrower and let's say that I even went the extra step and slapped the guy a couple of times and pointed out to him what his payment would be for the 27th time and he assured me that it wouldn't be a problem making the payment, was I truly being unethical?

To me, it's like the guy who owns the 7/11 selling cigarettes.  Yeah, he knows that the cigarettes are bad for his customer, but at some point he has to give his customer the right to make his own decisions.  As long as it was a legal product, I don't see the ethical problem in selling it to the consumer.

I know that this is not a popular position to take, but that's the way I see it!

Bob Mitchell

ValueList Real Estate Services, Inc.

My comment is buried in there somewhere and I come from about the same line of thought with you.  I would have to say the fraudulent transactions were born of greed and are few and far between than one would like to think.

Now if one doesn't think that a real estate agent can be indicted for mass mortgage fraud, one should think again.

Dave and Michael's conversations are lively.  When you understand the case above and what happened (and I performed a BPO on a non performing loan on one of the 277 mentioned homes from the above,) sellers and buyers are just as guilty.  Heck even title/escrow agents, list agents and appraisers should have even caught the fraud. 

When someone is raising the list price by 10% to get a sale done, eyebrows should be raised by everyone involved.  Instead it just appears that everyone would lie on their backs just to get the deal done so that the healthy paycheck would come in time.

Should we let sleeping dogs lie?  No I think there needs to be mass investigations and prosecution for all the fraud and deceit against the people who borrowed money under fraudulent circumstances, who appraised property with raised values, who allowed an addendum to slip by on their listing for rebates after close, who cut the checks for those rebates, who sold a house with a jacked up value.

Is it the fault of loose money?  I believe it created this atmosphere, yes.

The good old fashioned blame game! I have to agree with both if you it did have to do with lenders and it did have to do with real estate agents and it did hve to do with  lot of other people in the industry that were willing to "fudge" numbers a bit. Botoom line people got money hungry....now look whereit got us. At this point it doesn't matter who's fault it was....we can't change the past. The important thing is to move forward together and figure out how to get us out of this mess! 

Jessica

Mike,

I place more blame on the real estate agents than I do the mortgage people. Don't get me wrong, there were some bad mortgage people but here in my area, there are or were about 10 unethical real estate agents(refuse to call Realtors) and they were all using the same unethical mortgage lender.

These real estate agents knew the deals were not best for their clients or customers but they were looking for the quick bucks as was their lender. I am speaking from experience just about my area here in West Tennessee.

Creative financing was the Realtors fault!YEP, the Realtors listened to the MB make outrageous loans with teaser up the ying yang!

This is a very sad commentary of what went wrong....

Mike -  I may be just a humble real estate agent but I do believe everyone is to blame for this mess. But I also believe that we need to stop pointing fingers and get on with the repairing of the situation or we are all going to suffer. I think healing consumer confidences should be the first order of business now and we should get on with that in order to do business again. Just my 2 cents. Bob H.  

It was the Mortgage Brokers. 

It was the Lenders. 

It was Wall St.

It was the Appraisers.

It was the Underwriters.

It was the Borrowers.

It was ...                             (yes, also the Real Estate Agents)

Everybody you name in some cases are to be blamed for this mortgage mess. Great post Mike.

David - Glad to see you back, I thought you would sleep in late after last night!

Gena -  Thanks for coming back.  I'd love to hear you mortgage person's chime in here too.  Are they on AR? 

Karen - Yup!

Bob - Thanks for the thumbs up!  yeah I left that point out too.  Couldn't cover everything.

Renee - Interesting stuff there.  I'll have to go read that.   I was once interviewed by the FBI.  Not mortgage stuff - I was racing bikes and the guy who made my leathers turned out to also deal Coke.  Eeeek!

Jessica - Bottom line is right.

Mike - Whoa!  I wouldn't go so far as to put more blame on them or anyone in particular!  (ok maybe the Escrow Officers - kidding!)

Scott - No fault to anyone but the Mortgage Brokers?

I'm running out of fireproof suits....  Got to run out to the garage.

Mike >LOL!

I believe there is a lot of blame to go around, but that situation you put out there was rarely the case from my eyes and ears.   I usually tried to see what the mortgage broker could do and approve them for, but that picture you painted may of happened with your agents you dealt with, but certainly not mine. 

Like in any industry we have good ones and bad ones.  During the boom most mortgage companies sold the NINA's since it was easier for everyone involved and no paperwork.  Realtors have some blame, but I really believe the biggest blame should go to Countrywide and their network.  They really did some pretty underhanded things, and I would not be surprised if a lot of people went to jail.  Thanks for the post. 

Mike - As seems to be the general consensus here, there are many layers involved in this mess we all face. When I had to venture out of my bubble a couple of years ago to work to increase business with the extreme market slowdown, I was scared right back in to it for a while. Like Eleanor mentioned, I was handed the absolute dregs out of the bottom of the drawer, and questioned about the "low" amounts buyers qualified for and why I question if an investor intends to flip a property or not. Skins a lot tougher now, but what a rude awakening!

Ok, Mike... I need to find the Simpson Safety pictures from when the owner would set himself on fire for a minute or three in the top fuel suit...  He'd just sit there looking around. 

Anyway... you and Lenn are both right and both wrong.  Institutionally, real estate agents aren't the ones that are in the business of telling people what they could afford.  Our job is to find the right property that meets the criteria. 

Loan officers ARE in the business of telling people what they can afford.  So, Lenn is right...

But, there were many that knew that they could get an approval somewhere... so they pressed their preferred LOs to approve EVERYTHING...

And there were LOs that knew that they would have to shut their doors if they didn't approve stuff they didn't like.  So, you are right...

But there is a bottom line, and it is one that most politicians and others trying to curry public favor don't want to utter...

Consumers had the final say, every single time. 

Individuals may have given bad counsel... but institutionally, that isn't the case.  And consumers (by and large) decided that they wanted something and were willingt o do whatever it took to get it...

Always those exceptions, though...

Wow the great debate of 2008! Who's at fault? Like I ask my husband does it matter who left out the milk just put it back in the fridge before it goes bad. Does it matter,now? Perhaps the real question is How does this get prevented from ever happening AGAIN?

active|Mike

That's exactly the point I made in response to another blog concerning how we got into this mess. Yes, lenders and investors share a larger blame, and there are unethical loan officers out there as well. However, I can't count how many real estate agents go looking for that magical loan officer because the one they called initially couldn't (or wouldn't) do a loan to conform to their own personal requirements for their buyers. They were looking for a bigger commission check instead of really looking out for their clients. There's blame to go around for everyone.

For Lenn Harley, all I can say is she's going to have to "eat crow" on this issue.

It is easy to point fingers and shovel heaps of blame on both sides.  The fact is, when anyone loses sight of the client's best interests--including the client themselves...that is when Greed and Desire throw Common Sense out the window.

Casting blame doesn't solve the problem.  Working together to find rational solutions does.

Hi Mike - I haven't read all 300+ comments between your and Lenn's posts. Expectedly, this topic has created a lot of conversation, most of it in a historical context. It reminds me of the phrase 'if you spend too much time looking in the rearview mirror, you might not see the brick wall ahead.' What does the real estate industry do going forward in terms of lender and agent practices and consumer education?

Any loan officer/broker who did business in the go-go season in SoCal between 2000 and 2006 has many stories of being strong-armed by Realtors looking to get the deal done whatever it took. If the appraisal came in low, "give my appraiser a call- he'll hit our value". "Can't they qualify for more with a ________(neg-am, or interest-only, or ARM, or fill in the blank) or whatever.

HOWEVER-

By the same token, I sat in offices of both direct lenders and brokerages and listened to the guys and gals lie, obfuscate, cover-up, not disclose... and then laugh their asses off when they made 4 points in rebate/YSP on the back on a $500,000 loan and went shopping for a new set of wheels (and I mean gold plated wheels for the Aston-Martin they already had)

AND FURTHER-

Listened to borrowers ask if there was any way to get around income requirements, seasoning of funds so the money they borrowed from a buddy wouldn't be counted as a liability, etc, etc.

AND THEN-

I'd walk into the underwriter's office and they'd say "if you change this" or "take this paper out of the file and replace it with this" or "if you went to a 5/1 instead of a 30-year the debt ratio would fly with Fannie" or whatever....

Once and for all- It seems to be human nature for some, when faced with a negative situation, to automatically hit defense mode and try to find a scapegoat to blame in order to shift attention away from themselves. And others can't seem to separate themselves personally from the industry sector they are a part of and so the blinders come out and they scream from the mountain tops that "No one in my industry ever did anything to bring this situation about!"

C'mon people now, smile on your brother, everybody get together, try and love one another right now!

The only way to find a solution to a negative situation is to work together.

Now everybody gather 'round the campfire for a round of Kum Ba Ya...

In an ideal world every borrower, real estate agent, loan officer, real estate appraiser, secondary market lender sales rep, processor and so on down the line would be ethical and just do their job!  Reality bites and unfortunately it only takes one bad apple to spoil the entire barrel.  In many instances everyone was in compliance in just getting it done, in some instances only 1 or 2 of the professionals involved conspired to created fraud. 

• I have documented cases in writing where the loan officer asked my agents to commit fraud.
• I have documented cases in writing where another agent tried to commit fraud through the contract and more especially the fax sheet or email explaining "how to write it up to get it through".
• I have appraisals that I am now reviewing for Fannie Mae that make me shake my head - wondering how the appraiser justified what they did.
• As an appraiser, I have much evidence of loan officers asking me to just stretch a little, or stop being so conservative.

In every instance the perpetrator could go back and say "hey I was just trying to make the "client" happy so I could do business"....whether it be agent, lender, appraiser or other.

So no one bad group of folks created this nightmare, a bunch of hungry (sometimes greedy) people trying to maximize their profit created it!  This is why it is extremely important to personally know the people you do business with and to know that their ethics are the same as yours! 

Then you'll never have a problem or you can all go to jail together!  :)

 

Can't group everyone into this...good an bad in all areas of life.

I certainly am not going to say we all are to blame because all of us aren't. I'm not to blame...I didn't chime in with any of these folks and anyone who did any weird stuff like this and knows me...would not come near me with a ten foot pole.

 

Well my first thought upon seeing this headline was "hope he's got his armor on!". You make a good point and I was just having this conversation with someone in my office yesterday. Agents did put pressure on Lenders, no doubt. 

Thanks for writing this Mike.  I also wrote a post in response to this topic and I couldn't agree with you more

http://activerain.com/blogsview/595216/-Not-My-Job

I haven't had time to read all the comments here but it seems that some people are still NOT GETTING IT!  Just because you are ethical Realtor of the year does not mean that the Realtor in the next office is too.  Furthermore, it is highly absurd to say that Realtors don't understand mortages when it is clear that at least the author does (i'd guess better than some lo's). 

There is a comment on the original post attributed to Lenn in which she stated about a month ago that she doesn't have a problem with 100% loans for homes because people use them to buy cars which depreciate and houses appreciate.  That type of thinking on all parties is where we got to where we are today.

Again, nice job.  I flagged you for feature and encourage others to do the same.

Aloha Mike,

I agree with you wholeheartedly! We need to stop pointing the finger and assigning blame because almost everyone from the CEO's of the investment banks to the wholesale and retail mortgage houses to the Realtors and consumers were participatory in the meltdown. Perhaps not directly but definitely involved. We need to start focusing our attention on how do we create the change needed now.

Get over it and move on. Why do we have the liquidity crisis? There's no liquidity because people are afraid of uncertainty, that's it in a nutshell. Unfortunately, we have a perfect storm of high fuel, high inflation, and no liquidity, which makes it all the more important for all of us to stop quaking in our boots and be resourceful and fearless.

All we have to fear, is fear itself!- FDR

Peace,

Also Dave Daniels from FlyerstoYou - I think you understand the real estate market better than most Realtors.

The guy or gal lending the money...okays the limit, makes the loan. Don't pin in on Joe or Josephine Broker.  They bring you a borrower to pre approve...there are a slew of financing options out there...he is trying to sell a home, help the buyer get on board bank wise.  If the borrower is kryptonite and no one will touch him with a ten foot financing pole, that confidential information between borrower and bank should kill the deal over and over.  Lending standards varied, risk takers out there for higher return...loan is made in free market system.  The trouble comes in when federally backed loans are made with incorrect or fraudlent information.  That's between the buyer and the bank.  Unless a broker enters into a fraudulent scheme, shopping for lenders is still allowed in America.

Just a question -- and I don't in any way mean to be judgemental -- but do those in the lending field have a "Code of Ethics" similar to that of REALTORS? We have to get updates on it regularly even. And, if we violate any code items, we can be in big trouble. Again, no judgement here, just curious.

Also, I want to say that there is value in finding blame. If we don't find out what went wrong and who did wrong, we will not be able to keep it from happening again. "Those who ignore history are destined to repeat it". . . So, this discourse is very healthy and helpful. Thanks for your thoughtful post!

Good post.....at the end of the day, there will be unethical agents and loan officers and it's it up to those of us who care and want to do the right thing to monitor what's going on. 

The process needs better/more oversight if we can't provide the ethical component.  bottom line is that it comes down to greed on all sides.  Sad.

 

If the agent was acting in a fiduciary capacity, and the lender was not, and the client of the agent was more than willing to disclose and discuss their personal financial information with the agent, then the agent is the responsible party, and not the lender. 

The lender is only responsible if the action comes under Predatory Lending.  If the buyer was simply stretched to beyond their reasonable, but not legal, limits, then the buck stops at the agent.

Many agents don't understand that they have a much higher standard in representing their client in ALL facets of the transaction, and lenders often have none.  They are not fiduciaries, the are salespeople. 

That is why I am constantly harping on the fact that real estate agents are not salespeople.  As long as Brokers continue to treat the agents like salespeople, and government bodies put "salesperson" on licenses, they are part of the problem and not part of the solution.

Mike, you're right on and this did happen quite a bit a few years back when this mess began to simmer and more and more people had access to mortgages...especially those that allowed them to buy more home than what is reasonable with tools such as stated income.

I would get the "is that all" response followed up with "how about that stated income"...or agents would ask, "I'm just curious, how much cash to do they have in the bank"

Many buyers would come to me saying, "hey, even though I can buy $500k, but I just want $300k...please don't tell my agent".

In WA State, legislation has passed this year that has forced some loan originators to have fiduciary responsibilities.  It will be interesting to see if some agents decide not to work with those LO's. 

I personally do not need a law to have me put my clients interest first...I highly value my sleep at night and my clients who return and refer other to me.

You are sooooo right.  Maybe realtors should have to walk a mile in our shoes before they can do what they do.  They have no clue.  I have been in lending for 15 years and I sold real estate for 15 years prior to that, plus I did a short stint as an escrow officer.  I have had agents try to push the envelope many times. 

Now that things are back where they were when I first got into the business, things will slowly start to come back to life.  And slowly is the key word because many buyers have to be shown the way to homeownership.  Especially 1st time home buyers. 

It's back to basics, and those of us who can weather the storm will be better for the shake up.  

Gosh I just love a good debate.  She said, he said who knows who is right.  All I know for sure is that when I wake up every morning I can look directly in the mirror and know that none of my clients were "shopped" for a better deal, coercised to mislead a lender about their income or bid an unreasonable amount for a house that didn't appraise.  Now how about the CEO of Countrywide or the leaders at IndyMac?  Are they sleeping well on their bed of millions?

Mike, maybe you should look at the type of agents you attract . . . I have never pressured anyone into increasing someone's loan approval.  Futher, the whole industry was smoking crack when we started seeing properties appriase 40k over one that closed a week ago in the same tract.  The appraisers were just puppets.  The finger of blame is squarely pointed at the underwriters.

I agree, not all Realtors are unethical.  But there are some who can and will "strong-arm" an LO to get a deal done.  At the same time there are unethical LO's out there who will do whatever it takes to close a loan. 

There is plenty of blame to go around.  Everyone needs to except that!

I've worked 10+ years building a business based on earned trust.  I work with people who have been referred to me for mortgage loans because those referring trust me to do what is good and right for all parties.  I get happy when someone I am trying to help gets a better deal with a competitor - because I truly want what is best for the folks I am entrusted to help.  (Our company used to offer a "Best Deal Guarantee".)

So I've never done, for instance, a negative am loan - (except for one that I did for the personal residence of a lending manager, who knew it was the best thing to do when money was so cheap it seemed free.  He has since regretted his choice.) -And precious few ARMs (why risk an adjustable rate when the fixed rates have been so low?)  I have been a teacher, more than a salesman.

I am not trying to blow my own horn - I am trying to speak for the many (I hope) who are glad to do this work to help people, and realize the income, when it comes, almost as a surprise, a blessing.

It's not really all about the money, is it?

Mike, I think you're both right and both wrong. I think there are too many fingers in the mix to blame any one party. Each and every person is doing their best to do their job and accomplish the end result of a sale!

As my husband says...

QUOTE: What got us into this mess was loaning money to anyone just because they still had a pulse and could fog up a mirror!

LOL.  :-)

He also said, that an apartment owner knew our system was really messed up when he called a couple that applied to tell them they couldn't qualify with their credit for his apartments.

The couple said, "that's okay! We just bought a house!"

LOL.  :-)

Later in the rain~Deb

Blameing the Realtor for a bad loan is like blameing the clerk at the store for high gas prices...  So i disagree with this bigtime.  I have been in real estate 29 years and have seen almost everything except the wind. If we had a judicial system that was run by people with guts, who would throw someone in jail for 10 years for mortgage fraud instead of slapping them on the hand and saying no no. Make the punishment so severe most loan officers would get out of business period. So simple to solve

LOL!  Deb is right.  It was much easier to buy then to rent.  The qualifications needed to rent where higher.

Ardell brings up an interesting point. Realtors, by nature of their license have a fiduciary responsibility to their client, whether buyer or seller. I do not. I have an ethical responsibility, but not a legal fiduciary responsibility.

Loan Officers/brokers/banks have a legal responsibility to operate under the guidelines of the lenders and the government, and an ethical responsibility to not place a borrower into a loan that would be bad for them. But ultimately, it is the borrowers choice as to whether or not they want to move forward.

It is not my position to tell a borrower that they cannot afford a payment. If DU/LP approves their loan, it could be considered discrimination.

It is my responsibility to verify the information they give me (to the extent required by the loan guidelines), recommend the best loan for their situation, (based on the information available to me), and to help the borrowers understand the ramifications of their decision. 

What is done is done..Learn from it and move on... Glass houses and stones don't mix... All of us profited even if it was only vicariously.  IT was an UP market and it affeted everybody that worked in the related industries.  I dont' know of anybody that didn't profit.

What was done was done for many reasons, some but most bad

OK.  Got a new Fire proof suit on and heading back in...

David - You are welcome.

Karen - Bottom Drawer Deals are in every industry.  Zig Zigler even talks about them.

Lane - I was sure you would have a good driving suit picture!  Coma on back an add one.

Susan - Great Milk Reference.  Good analogy.

Lewis - I think Lenn will be doing just fine.  Maybe this debate will attract more people to her blog.  She writes some pretty good stuff.

Kent - True

John - Neither have I, and good point.

Aaron - That's worthy of a post all to itself!

Michelle - Very true.  Thanks for putting that together.  Yet another lengthy comment.

Sally - not everyone but the industry.

Colleen - You betcha!  Fireproof Underwear!

Above all - I'll head over there and read.

I blame the government for not policing the Industry(s)

Anyone could see this coming. especially GREENSPAN

GREED is to blame.  Wall Street started it, lenders followed their lead, LOs took advantage of it, Realtors wanted to sell more homes and worst of all, Buyers didn't educate themselves before making the biggest purchase of their lives.

As you can see, everyone wanted more and everyone made more money.  Now everyone has to pay the price.

I've read a few times in the various responses to Mike and Lenn's articles that some Real Estate Agents refer their client's to three different mortgage lenders. As a busy loan officer who works in the best interest of my client's, I can honestly say that I would not accept a referral from any Agent I knew was sending the same client to two other loan officers.

Why? If you don't trust me to take care of your client, then I don't want to work with you. I do not appreciate my time being wasted.

So what if someone refers their client to me, and I don't have the right program for them? If you know me and you trust me, then you'll know that I will get them in touch with another Loan Officer that I know and trust.  

If I get a client who does not have an Agent, then I ask them questions and get to know them...then I refer them to the Agent I feel will best fit their needs. I trust the people that I work with, and I expect that they will give my client's the same level of care and service that I do. Referring my client's to three different Agents is a waste of their time and a waste of two Agents time. 

It's kind of like showing someone a bunch of houses and then finding out that their uncle Billy-Bob knows an old Army buddy who dabbles in real estate and the client ditches you.

Time is valuable. Respect others time.  

Greed is definitely to blame. Just like greed is to blame for so many of our societies problems.

Kimo - Nice to hear from you.  It's been a while.  Liquidity is the whole enchilada!

Andrew - Remember we're talking the entire industry.  Not just Joe.

Dawn - True.  So many LO's are not even licensed in the state of CA

Ana - And if those of us who cared didn't talk about it like this - what might we hope to fix.  Discussion is good!

Adell - That's a great point.  "Salespeople vs. Fiduciaries"   

Rhonda - Thanks for the support.  I think any LO that's been in the business has had "the phone call".  If they haven't I don't know where they've been.

Barbara - And I think most LO's should have to walk a mile in an Agents shoes, and an underwriters, and a ...

Cindy - Isn't this great?  I love it.  This is what the old days of AR was like.  Good Discussions.  And yes, I called Angelo last night and he said he was sleeping very well.  He said he just got a new Teddy Bear!

Elizabeth - Snaaaaap!  Ow!  Once again, this isn't about you.  It's the industry as a whole we're talking about. 

Hey wait a sec.  Didn't you just say the whole industry was smoking Crack?  I'll have you know I have never now nor do I ever plan in the future to smoke crack.  How dare you insinuate I am a heavy duty drug user!  Is it just because I have a VW Bus?  I'm offended!

Richard - Yup.  I've been strong armed by the best of them.

Bob Gilbert - You fit right in here.  (Except Elizabeth said you smoked crack!  (kidding)

Deb - I'll take beeing right and being wrong.  I'm ok with that.

Just so any one who cares knows, I have done 500+ loans over the past 5 1/2 years in this business.  I have never done an "Option ARM" or any type of negative amortization loan.  As far as I can tell, I have 1 borrower who went into foreclosure.  I work on 100% referrals from past clients and Realtors.  Most of my customers are "A" paper.  I feel a huge amount of pressure from my Realtor base to get a deal done.  If I don't, they turn to the next LO to get it done.  I was reprimanded by a Realtor because I talked a customer out of buying a house she could not afford.  Although I was able to approve her for a loan, she was not comfortable with the monthly payment.  I told her if she wasn't comfortable, she should not purchase the house.  I actually felt good because I was able to provide her with all of the necessary information and helped her make a decision that was in her & her familys best interest.  What did I get for my efforts?  I lost a top realtor and all of their referrals, because I was honest.  So anyone who says, Realtors (as an industry) have no blame in the current situation, is full of it.

What everyone should be doing, instead of spending so much time on pointing fingers, is helping to educate the consumer and focusing their time & energy on finding a solution to the problem.  It's time we all got back to basics and started working for a living.  Get out and market yourself.  There are deals out there.  You have to work harder to find them and work harder to close them, but they are there.  If you can make it through a tough time like we have now, you will be in a prime position when we come out of the down market.

I'll step in here with my 2 cents worth.

Lenn is right!

Mike is right!

I want to see perp walks, a lot of perp walks. I want to see local LO's who fudged in handcuffs (better arraign them here, our sheriff uses pink handcuffs and will issue them pink underwear. He will also feed them green baloney sandwiches.)

Not only do I want to see the local LO in jail, I want to see some (many) corner office suits in prison. I want to see serious time, and I want their assets attached to help pay for this mess.

If, and it has happened here, an agent contributed to the fraud, pijnk handcuffs for them too.

That's my story, I'm sticking too it!!!

Greenspan lowered the interest rates to historical lows to stimulate the economy after the dot com bust and 9/11. The lending institutions created the ALT loans to get that money out into the economy. The loan officers, appraisers and agents did their job with the tools they were provided. Buyers, not wanting to get left out of the appreciation a home provided came out in droves.

Yes, there are a few bad apples in any bunch but the majority are good, honest hard working people.

Don't place all the blame on any specific group in the real estate industry, put the blame where it belongs, the government. It's their responsibility to make sure crooks don't take advantage of the system. The banks, they made a ton of money when they packaged and resold those loans. And they will make a ton more when those REO's sell.

I didn't see any mention of investors being part of the problem. Look what they did to the dot com industry (negative cash flow is good). Once that market was wrung dry they moved onto real estate to take advantage of the up market. Now that real estate is in a down market they moved on to oil commodities (high gas prices). Once that goes bust they'll move onto something else. I just wish I knew what that "something else" was so I could protect my assest.

Tim - It's fine that you disagree.  I disagree with your disagreement.  I do like the idea of stiff penalties though.

Larry - That's a good point but what if you ran it thru DU full doc got an approval for $300,000.  The Agent wants to show them a $500,000 home.  "Can't you just go stated?"  Remember this is back then, not today (where stated was easy)  Is it still right?  What if the only way they could have approved was with some POA with a 3.5 margin?  Still right?

Damian - I disagree.  Let's accept responsibility, decide how best to make it better, and then move to the future armed with the knowledge so that we can prevent the same thing from happening again.  Or at least that's my take.

Steve - Can we throw rocks at Alan?  Personally, I'd much rather have less government than more government.

Richard - Greed and maybe the fact that people were just trying to keep up with the Jones'   

Jeff - Can't say I've ever been a big fan of the three card system.  However, it's part of the world I live in.

Whew!  All caught up.  For now. 

Don't forget to catch the 4Realz Roundtable today with Lawrence Yun

You are very correct Mike.  The scenario you described happened regularly......in that form or similar.  It could be as small as the agent requesting a different appraiser.  It's an ugly pie and everyone needs to take a bite.  The banks need to take a bite, LOs bite in, appraisers chomp some and yes, real estate agents also scrape some. 

Ardell- "A fiduciary is someone who has undertaken to act for and on behalf of another in a particular matter in circumstances which give rise to a relationship of trust and confidence." Bristol & West Building Society v Mothew [1998] Ch 1 at 18

This is the best definition I've seen yet of exactly what this over-used and little understood (let alone adhered to) phrase really means- both from a common-sense as well as case law standpoint.

That being said, to state "...lenders often have none. They are not fiduciaries, the (sic) are salespeople." is a gross generalization of an industry as a whole. If one, as a loan officer/broker, were to commit mortgage fraud, one is held to legal punishment under both state and federal agencies.

When a realtor views the lenders as a necessary evil, as secondary to their own success, and as parasites in the process, they miss completely the way a mutually advantageous partnership between the realtor and the lender can and should be realized for the success of all the parties involved.

I've never viewed myself as a sales-person. Either as a realtor or a lender. I am personally offended when a realtor implies, let alone publicly states (as you did) that I have a lower standard of responsibility to the client than they do. Are there lenders who do feel no responsibility to the client? Yes. But you've stated that ALL lenders have lower standards than the agent and ALL lenders are salespeople and not fiduciaries. Am I offended? Bet your sweet bippy!

I've spent hundreds of hours educating myself on the role and responsibility of both the realtor and lender, and pass that knowledge onto my clients in a FIDUCIARY manner- as a trusted advisor with their interests top-most in mind. So, if a realtor is not as well versed in his business, then that makes him a "salesperson" rather than a trusted advisor. So I suppose we do agree on that point (albeit in a skewed way) I don't partner with salespeople either.

I've been actively involved on both sides of the fence, so I feel very confident in being able to choose good partners to work with. The key word- PARTNERS. When a realtor has a mind-set from the get-go that I am less than a professional, and feel no "fiduciary responsibility" to the client without any knowledge of my ethical standards, lumping me into a general pool of all those "other crooked loan officers" (Have heard this more times than I can count) I take a fairly dim view of their professionalism. 

Harp all you like that "realtors..." (every single one of them in existence-past, present or future? Generalisms generally suck- in general) "are not salespeople." The fact is that when a realtor OR a loan officer doesn't place the interests of the client above their own, in a FIDUCIARY manner then they are both "salespeople".

It's a horrific time in our country's economic history. The only silver lining I see is that one of my hoped-for results is that both those loan officer/brokers AND realtors with a "salesperson" mentality, with no ethics or feelings of fiduciary responsibilty will leave the industry and move us back up in the public's perception level above the current tie with used-car salespeople.

Anyone spending any time on the Rain would be encouraged at the HUGE number of both realtors and lenders in this country who are as outraged as I am with the others in their industry who have drug the public's confidence in our group into the gutter, contributing (equally along with many, many other factors) to the economic mess we are faced with. I am confident that, with the professionals I see here, the real estate agent and lender industries will see more better times ahead.

I think many of you are giving too much credit to the Government.  They should be there to uphold our laws and decide the punishment for people who break the law.  We live in a "Free" country where people can make their own decisions and have to live with the consequenses for the bad ones.  Investors who bought mortgage backed securities got greedy and wanted more mortgages to buy.  They told the lenders to loosen their guidelines to allow more people to qualify and they will buy those loans too.  the Lender did and here we are today. 

That is where it started.  Because we live in and entreprenurial society, LO's, Realtors, appraisers and everyone in the Real Estate indusrty took advantage of everything they could.  Do you really think the Option ARM was created for a borrower in Cleveland, OH?  Or that sub-prime borrowers would really pay their mortgage, on-time, for 24 consecutive months so they would improve their FICO enough to qualify for a conventional mortgage?  NO!!! But creative people found creative uses for the products given to them.  Everyone up the food chain turned a blind eye to it because of all the money they were making.

I think your statements sum it up..."Many Loan Officers learned to toss their personal ethical judgments and 'Make the Deal Happen'.  Others did not, and yet others fell somewhere in between."

Let me just say there is ethical and unethical and NO in between.

I agree that there are unethical people in real estate and lending... Let's face it there are unethical people in every type of business.  I am sure there were Realtors that pushed loan officers to "make it happen," but I believe that we are talking about the minority here. 

The main reason we have the problem is because lending standards were entirely to loose.  A problem that goes much higher than the loan officers and the real estate agents.

Poor Mike... you must being going broke getting all the fire proof underwear..:))  I haven't seen you in the same outfit twice.

Guess we all have passionate feelings about this subject... I remember when I was in high school and took a typing class... (yes, on a real honest to goodness typewriter, and not all of them were electric either :))  we had a phrase that we typed that helped increase our speed and knowledge of a key board..

"Now is the time for all good men to come to the aid of their country" was what we typed over and over and over.. and I see that as a very fitting phrase for the times we are in right now...  Our country is in very tumulteous times.. the mideast, gas, housing, food, jobs...greed, improper leadership...the list can go on.. Tempers are high, confidence in our futures and the futures of our children and grandchildren hang on a thread.. the REAL value of homeownership shifted from the pride of owning a home and having a place to raise your children to the greed of appreciation...  but I guess my point is that REALTORS and now Mortgage lenders and banks have a long long way to go to recapture what reputations we had, if any, and if its possible in our lifetimes our livelihood. 

We live in a society now that thinks owning a home is a right not an honor... that double digit appreciation is the norm and that saving for a home is an insult to our over extended, credit laden, Immediate gradification lives.  PLEASE... our time (as an industry) would be WAY better spent thinking of ways to get out of this mess instead of blaming... we have much more to worry about than who started it... The real culprits will be out of the business in no time with many dying on the vine as we speak...

Gloria

 

I think the Blame game is going to get us no where.......We have to move beyond blaming each other and focus on a solution.  We are small beans compared to the other drama.  The Fed gave us teaser rates, reducing, reducing, reducing the FED rate then Raise, Raise, Raise,,,,
We are blaming who... Each other...

In stimulating the economy after 9/11 and all the other problems since 2000.  Remember when we first got those rebate checksssss... Helllo......
I think enough is enough....
Just focus on moving foward.....

It's amazing to see how many hermit crabs we have in here that once they heard the storm coming tucked into their shell and closed their eyes and have no clue.  And think that just because they are a "good agent" in their own eyes that no other agents ever did anything to help this situation along.

First I would like to point out that it appears that the word "lenders" is encompassing the banks, broker, underwriters, investors etc.  I don't think all these people can be lumped into one word like it has been. 

Lenders have specific loans they do.  Some do A paper some did subprime.  So if you go to an A paper lender they are going to turn down many of the not so perfect loans.  However a subprime lender will not.  The investors buying subprime loans realize there is more risk and therefore they charge higher interest to make more money and cover the losses.  So is it those investors faults the borrowers defaulted on their loans?  NO!  Is it their own fault for investing in those borrowers that have a proven track record of not paying their bills?  Yes!

There are a ton of bad LOs out there weather they work in a bank or as a broker.  Yes there are many of them who grossed up incomes and "presented" loans in a certain way to get loans done.  Were they fraudulent?  Yes!  Did they hold a gun to the borrower's head that could plainly see what his payments were?  NO!  The exception I would say to this are the LOs selling ARMS and more specifically option ARMs that didn't disclose the negative am. portion of the loan so the borrowers didn't understand what they were getting into.  For this I would place more blame on the LO but the borrower still has his obligation to research the loan and understand it BEFORE he signs the documents.

Then you have the issues of the realtors who try to show their clients houses that are just above their price range.  When your commission is based on a percentage the higher the house price the more money you make right?  Telling clients to buy the biggest house you can possibly afford then when the lender says no taking them somewhere else.  This DOES make the LOs want to try to do what ever they can so they can get the business and put food on the table.  It may not be directly strong arming by actually telling them to pad the income or what ever it takes.  However it is the silent "given" that is known that if they don't approve it the agent isn't going to just take this deal somewhere else but all deals from here on out.  So in these cases the blame does fall on the realtor.  However again when the paperwork is signed and the payment is right there in front of you the borrower is the one who agrees.

Then you have the people who put the subprime loans in securities and rated them as AAA and sold them off to investors who thought they were getting good investments.  When those loans started defaulting they had no control over it.  In this case it was the people who put the securities together. 

So in the end blame falls not only on the "lenders" but ALSO on the real estate agents and the people who put the securities together and, in one way or the other, everyone in between.  However IMHO the biggest blame falls on the irresponsible borrowers who borrowed more money than they could afford to pay back, got payments larger than they could actually afford in the first place and didn't do their due diligence in knowing what they were signing. 

am thinking it was Gary Condit's fault. The sub prime mess, Fannie, Freddie, the killing in Aruba, Jon Benet, the missing child in Portugal... Condit did it all. So you and Lenn are both wrong.

are you making an appearance at blogger connect?

best

Well, After reading all of the comments (yes, all of them) I don't remember what I wanted to write.  Passion for our business is great to read and hear and differences of opinion fuel our need to hopefully understand, and in some way, better this mess we are in.  But no matter how you slice it, this is and was about greed; pure and simple.  Easy money makes for strange couplings in business relationships. Enough said....

Hey Mike, I'm not going to read through all of these comments.  :)  But, there was fault everywhere.  I am the really strange Real Estate Agent that talks people DOWN in price.  I actuallly take time to walk through with people what their costs will be as a homeowner if their lender hasn't...meaning potential maintenance, utilities, etc.

I purchase my first home as a single mom.  It sucked. PLUS, I purchased a home 1/2 of what I was approved for...still, the expenses were more than I had ever imagined. People need guidance and not everyone is willing to take that time and effort to help. Shame on them...that's all I'm sayin'.  :0)

Aaron,

With all due respect, you just don't GET it.  The LAW in most states requires licensees to act as fidicuiaries and does not require the same of lenders.  I'm not talking down to lenders.  Fact is fact; law is law.

I totally agree that some lenders "act" like fiduciaries and some agents don't.  But the law does not require the same standard.  Legally in most cases, the onus was on the agent to oversee what was happening, is my point, unless the client shut them out of the information and oversight process where the loan was concerned.  A fiduciary cannot delegate to a non-fiduciary (the lender).

A professional acts as he MUST not as he FEELS and a lending professional must act in the best interest of the company they work for.  That is their job.  An agent must act in the best interest of the client, that is the law in most states...and it is changing.

"...feelings of fiduciary responsibilty" 

Fiduciary responsibility has nothing to do with feelings.  It is either a charge or it is not.  Last I looked the mortgage industry was not charged with fiduciary duties during the last few years.  Some are fighting for that change to take place.  Others are fighting for the mortgage industry to NOT take on the charge of fiduciary duties.

The public has the right to fiduciary level care or they don't.  This should not be left to how one lender feels vs. another lender.  The public has the right to know if it is a legal duty or not...it is not. "acting like one" doesn't make you one.

And agents need to recognize that lenders are not charged with fiduciary level of care and stop delegating that duty.

What can I say, you won me on your bike.  I'm like you're little fan who can't get enough...here you go takin on Lenn.  Gotta love it and ...I think you won.  This battle anyway.  I'll wait for the next one.

Realtors definately have their share of the responsibility.  I have heard many, many doing whatever they could to get their clients approved.  Can you really fault them?  Yes and no.  Realtors work for their clients to get them what they want.  The client wants the house, "if such and such who make as much money as we do can buy a nice house, we should be able to" and they put pressure on the lender and Realtor.  Clients will say, oh yes, no worries, I'm getting promoted, I can pay it, I'll get a part-time job, I'm going to be a manger, I'll get the money and will tell you whatever they have to so that they can get what they want, the nice home like their friends have.  So would some Realtors push lenders?  You betcha.  Would they go to another lender who would get their client the loan?  You betcha. They are hired by their buyers to get the buyer what he wants and once they did, the buyer was happy.  Right or wrong?  Who made the final decision?

 

I've got to get home and meet the family for a little dinner before I can get back in follow up.

BTW: Ardell - loved your being in on the Roundtable. Dustin has such a good thing going there.  And I really loved that you wanted to remain muted.  It was the highlight of my day!  Hey, who's to say Yun wasn't actually Guest 13? 

I have never gotten involved with the financial planning of my home buyers.  It seems like such a private matter that I really don't feel is my business.  People come to me in order for me to help them find a good home a negotiate a good deal. They don't come to me for financial planning advise.  Unless you are a certified financial planner and have access to their total financial picture, I don't know how you really would be able to give them sound financial advice. 

If I am buying a home, I'm not going to discuss my personal finances with a real estate agent.  I'll shop around for lenders who offer a program that works for me.  I'll only share with the lender the information that they need in order to approve my loan. 

When I want the opinion of my real estate agent, I'll ask for it.  I really don't  want them to act like my mom and tell me how much I should spend on a home.  I'd feel offended if my agent would tell me that they wouldn't help me with a home purchase because they thought I was getting in over my head. 

 

this is so fun cuz everyone just lays it out there on the line.... I can imagine how many real estate people said, "well, prices are kinda high now, why don't you just wait a bit and I'm sure they will come back down....."  The realtors I know and Love didn't even see a buyer for the last 6 or 7 years, "I'm only representing sellers right now Jen or I'd refer someone to you."  Everyone had a friend in the business and new folks experimented on their family and friends and honestly, the realtors just let them... it was easy as going to Costco and getting a loan..... but over and over again may I please reiterate... the loans are not new... the products are not that outlandish.... neg am has been a good loan for some and not for others since the 90's that I am aware of..... the problem is that too many stupid people jumped into the market when they had no knowledge.. and supply and demand does what it always does... it drove up prices and these dumb investors believed that these prices were real.... I can say that every time I told my client to walk away because the appraisal was not coming in, magically, the listing agent found an appraiser that they could get to make it stick... and if the borrower wanted the appraisal that would make it stick, shoot, it ain't my trouble if the lender swallows it.... but trust me, the appraisals not coming in now, is um, not the fault of, um, the lenders... we are scratching our heads like wait, it's worth what now, just a year later??? how sad, $250,000 less than you paid, oh well, call your realtor and talk to them about that.... your rate isn't gonna change for 30 years....

Well Mike,

You are now my witness that I in fact at times CHOOSE to be muted :)

As to Yun being in the chat...well, what can I say.  There's nothng I wouldn't say to him or in a room with him.  I just didn't want to be disruptive to his purpose there.  It is my understanding that Dustin looks at the chat for any questions for guest speakers and they are not reading the questions themselves.  I have no problem with him seeing it after the fact...I did say I felt sorry for him, I just didn't want to be a negative influence during his time there on him.  He was gracious enough to accept the invite and I'm 99% sure he was reading and talking at the same time.

I adore Jonathan Miller and I don't get to talk with him often, so I was more into talking to him that listening to Yun.

 

I am a big believer that adults should act like adults.  Lenders to blame? Realtors to blame?  It is very easy for consumers to point the blame on the Lenders and/ or the Realtors because that is much easier than looking in the mirror and admitting that they were very much aware that they were buying a home that was above their means promising they would give up the starbucks or the eating out.

Are Lenders and Realtors babysitters?  I do not think so.  Sub-prime would not have existed if there was not a demand from consumers. 

It was the consumers that kept shopping until which time they found a lender that would approve them versus listening to the sound advice to wait. And it was the consumer that agreed to the payment and terms. And it was the consumer that chose not pay their payments on time.  It is amazing to me that a Lender or a Realtor would be blamed for giving an adult the benefit of doubt that they will be responsible and pay the mortgage on time. I guess that was too much to ask. 

The overall economy is not the best.  Don't get me wrong as I do feel for anyone that is losing their home... I just do not think the consumers were unwilling participants in their purchases and acceptance of the mortgage terms.  If the market continues to give huges amount of appreciation then no one would be crying victim.

 

What about the homebuyers?  The ones who demanded to know why Joe Smith who worked next to them at work qualified for $25,000 more house.  Everyone wanted to keep up with the Jones'!  Buyers didn't seem to care how - they just wanted the house, preferably one that was larger and better than their colleagues.  If they didn't get what they wanted, they would go find someone who would get it for them.

Way to stir it up Mike...calling out one of the big AR players by NAME no less!

I'm with Lorie on the consumer angle...

---Georgia Realtors---

Hey Mike,

Does that guy ever get to use that driving suit and get into a smokin' rod?

Mike, no he is not on AR. The poor guy works night and day and is at the agent's beckoning so I don't think he has the time to devote to AR.

One thing I firmly believe and would like promoted and something that I don't think most people know is that Mortgage Brokers are the ONLY people in the Lending field that actually have a license and are finger printed.

All of those bank employees that folks go into see that think they are the epitome of mortgage loan knowledge would be aghast that they may have been driving a delivery truck last week and never had to take a test and get a license.

Perhaps, if we had stronger prerequisites. required accountability, testing, licensing and continued education of lenders, loan people (I use that term very loosely), then we might not have the huge mess we have today. At least not to this extent.

Just an opinion...however I like my opinion.

Hear! Hear! Mike!!!

One of my favorite corrupt agent stories (not so funny today) was an agent I had in a transaction whose American Express bill was $15,000.   I was doing the loan for her client.  

The sales price was $750,000.   The appraisal came in way light at $675,000.   

When I called to tell her this news, she replied, "But you dont understand, Aaron, we NEED $750,000!  I have a $15K AMEX bill  I have to pay!!"

I was flabbergasted and didnt know how to respond other than "sorry."  

The next thing I knew the buyer cancelled with us, went to the agent's "preferred" lender and I never heard from her again. 

I heard the transaction closed at $750,000.

It is unfair for Lenn to blame anyone other than EVERYONE.    Thanks for the support of the industry!!!

I've never seen so much protective clothing  in my life....Anyway - I haven't been through ALL of the comments - but I will say,  as a Realtor who came in at the crest of the wave, that  I saw plenty of questionable activity in my first few months as an agent.  The biggest issue was agents pulling comps to get the appraiser to "adjust" or "be reasonable." To many, it was all about sealing the deal.  Realtor's were hardly blameless.

I just thought of something else after following all of this the past couple of days.  Let's suppose for a minute that Realtors are really innocent in all of this and that no one ever shopped a deal until they found a lender who could get it done, pulled comps to get the agent to adjust, and that they rellay don't understand the mortgage industry like they claim.

Who is it that sets the price for houses when they are for sale? Who encouraged buyers to bid asking price or above regardless of what the home was worth?  Whose idea of a comp is the last home that sold at the highest price regardless of whether they were alike? 

This is how agents seem to arrive at their list price: Last home sold a week ago for $350,000? Let's list yours at $375,000.

Let's not forget that artificially driving up prices played a role in this too.  Who cares if the buyers overpay today, next year the home value will double, right??

Mike...

There was an article in Time or Newsweek years ago, "Crybabies and Busybodies", talking about our society has become so sue crazy and so easy to place blame on everyone else for their actions.  No one wants to take responsibility for their actions anymore.  That's the crybaby, the busybody is of course the person that wants to tell everyone else how to live.  Their way is right and everyone else is wrong.  They don't care about taking responsibility either, they just want to tell everyone else how wrong they are, and they ned to live their life the "right way"...their way..

The author was so articulate and it was so well written, + I agreed with everything they said, I kept it for many years, but can't find it now unfortuantly.

I recently used the title in one of my post, "Crybabies and Busybodies", not of course anything close to the "price of art" this article was, but that's how much this has stuck in my brain, it must have been 15 years ago at least that I read it.

Realtors cashed their checks along with everyone else, so of course they had some responsibility for continuing the mess of, as Deb said loaning money t anyone that was breathing.

It doesn't matter who started what when first...bla bla bla, WE ALL need to take responsibility.  We all need to do our part to help heal the industry. 

As has been said, their is plenty of blame to go around, but that is not going to accomplish anything.  One person at a time needs to take FULL responsibility for their actions and do the right thing.  Be honest, do a good job, work hard, make money, and live your life to the best that you can be.  Help others, be happy and live and let live.

Having said that, even through I am an eternal optimist...our society has gone too far into the realm of "Crybabies and Busybodies" for that to happen.  However I can do my part and run my Real Estate business ethically, and not do business with, and turn down business where i think something is wrong.  Like the agent who brings an offer on one of my listings for $100,000 over list price because the buyer is going to "fix it up, add a pool, etc....yea right!".  Oh and not to worry the loan officer has an appraiser that will "bring the value in" and "trust me this is perfectly legal, since they are going to do all this work"...yea right! 

 My advice to the seller is "You don't want to get involved with this, it's mortgage fraud".  Then you have to argue with the seller, because THEY WANT TO TAKE THE DEAL, they don't really care what the other Realtor, buyer, loan officer, appraiser, underwriter is up to...they want to sell their house!  So now they are involved with it also, indirectly...but that still counts, IT'S WRONG.

If it's wrong don't do it, if it sounds too good to be true it is.  Everyone just needs to do the right, honest thing, and take responsibility for their actions.  The world will be a much better place if that could happen more often.

Great post, and I totally agree it is not just the lenders that are the only ones, it is everyone that was involved through greed that wanted to "Just get the deal done and cash their check"!

Liz

Dave, I'm back (its morning here once again), I think it hit 120 degrees yesterday, so you know my heart bleeds for Californians. As for Marcy, it's only because I know a great deal about what happened that I don't see her as a crook.

Marcy is mentally disabled, and takes a great deal of medication. She should have never been working for a lender while on SSI, but she was asked to and naively took the job. She simply didn't have the mental capacity to understand what was going on, and the fellow "Julian" was about the smoothest talker you will ever meet.

As for the crooked Realtors you mentioned, I see it like this; they were never realtors to begin with. They were crooks that got a real estate license so they could use it to steal. Much like the pedophile that becomes a priest; he's no priest, just a wolf in sheep's clothing.

To me, the banks should have protected their money, it was their obligation. I don't see that they have a problem doing so now. I'm sure agents and buyers are still putting this horrible "pressure" on them, but all of a sudden saying no got easy for them. Imagine that.

The old answer "they told me to" has never been a good excuse to the "why'd you do it" question. I assure you, if you look through the files of a real estate brokers office, you'll see no credit reports in them.

Ardell,

Oh, what the hey. I was done, but I'll answer you.

I'm not sure what it is I don't "get". I was trying to point out to you that making an all encompassing generalistic statement that "ALL"  of any group, lenders or realtors, are one thing or another is grossly irresponsible. In this case, you stated that "They (all lenders) are not fiduciaries. The (sic) are salespeople." And further that "(all) real estate agents are not salespeople" in a very blatantly obvious way making it clear that lenders do not hold any fiduciary responsibility to their clients.

In one fell swoop you've made it clear that you know, unequivicably, that all lenders are parasites. If your written statements are your true feelings on the matter, I suggest you copy and paste this statement to all future referrals of clients you send to a loan officer/broker so that they know up front you don't trust them, and will believe anything they say or do will be unethical.

Please don't use the word "respect" to preface your post and in the same breath tell me you believe we lenders have no sense of responsibility to the client, and instead "must act in the interest of the company they work for". Even if I were the only lender (and this is a generic term for the sake of simplicity) in the history of the world to not believe this, to not conduct business in this manner, and to hold themselves to a higher ethical standard than the basic legal standards imposed by the government, your statements charging "ALL" lenders as having no feeling of fiduciary responsiblity to the client is, again, a very offensive statement of me personally, and more than likely, all other lenders who hold themselves to a higher standard.

Fiduciary is a term indicating someone who acts on the behalf of another which results in trust and confidence. It should not be confused with a rule of law, with set rules and proceedures, by which a particular professional must act in order to meet standards resulting in the classification as a fiduciary. This isn't a professional designation you can display with an acronym after your name like "SGF"- Sterling Gold Fiduciary.

If you are prepared to retract your statement that ALL lenders, especially the ones here on the Rain, have no fidicuary responsibility to their clients, and are merely "salespeople" (like that's a dirty word) then I'll be mollified.

And you were right. I believe I deserve your "due respect", both as a professional (with all the pride that term deserves) and as an ethical and moral business person. As do ALL  the other "lenders" who conduct their business in the same manner.

General indictments of a particular group of people is not good. "Get" it?

All this to merely agree with the post that no one should be able to discount that each of the individual professions had "bad apples" who contributed to this current mess. No one group is immune from responsibility. But "bad apples" is entirely different than an indictment of "ALL" of a particular sector. To state this serves no purpose other than to raise the level of vitrol.

Why not just blame the old home inspector?

Michael,

Yikes! 120 degrees! Is "sweltering" spelled with a capital "S" or lower-case "s"?

I went back and re-read the Marcy story, and with as much respect as I can muster for her diability...I don't buy it:

==========================================

"I, Marcy the sole borrower listed on both loans, worked part time as a loan officer at xxxxx Financial Group, owned by Joe Smo, President and CEO. In February 2005, I was offered a fulltime position as the loan processor for company VP, Julian Crook. which I accepted. While there I observed him doing several things:

* Utilizing a "stated loan" option where the lender allowed the buyer to state their income and/or assets without written documentation, pay stubs or W2's to verify the information.

* Transferring money into the buyers accounts to meet the lenders' reserve condition.

* Creating/changing bank statements to show income history.

* Using "Platinum Computer Co", a fictitious company for job verfication (Julian had purchased a business license and had a 1 800 #, The lender would call the 1 800 # asking for the verification from the Co. and they would actually be talking to Julian who would verify the information).

NOTE: She observed him commiting fraud, but alas the story continues.

Then Julian brought up an opportunity for me that he said he used a number of times. He would find property to buy, help me get a loan on the property, he would pay all mortgage payments and cost of repairs and renovation, and then resell the house. I would get $10,000.00, after the property sold and my credit score would increase due to the property value and payments. I told him I was possibly interested.

I saw it as an honest, profitable real estate business of buying and ‘flipping' homes. With (my) credit and Julian's abilities in real estate and sales (once I saw one of his 2004 bank statements it showed one month deposit of over $100,000), I saw it as a very viable and credible venture. I learned many months later, that these types of loans/schemes are referred to as Straw Loans, and the person who's credit is being used and buying the property is the Straw Buyer.  

NOTE: LOLOLOL!!!!!! She watched as he committed crimes...but she saw THIS as an honest opportunity??? That is way too funny! Good luck during the investigation Marcy! You're much too articulate (not to mention you worked as a loan processor) to plead innocence. I hate to tell you this....but you MAY be doing time for mortgage fraud, no matter how much you admit to it.
"Your honor...I admit it. I robbed the bank. I stole the money. Can I go now?" The judge will likely have compassion for your illness too, which is why he'll allow you to take your medication with you to your brand spanking new "big house".

On September 22, 2005 I signed the papers for the property. I "knew" it wasn't right, but I trusted both Julian - and the company, I looked forward to doing the work needed and building a new little enterprise. 

NOTE: I knew it wasn't right, your honor. But if you let me off the hook this time, I promise I'll never do it again.

=========================================

I'm sorry Michael, I can't share your compassion for this woman. Although I honestly feel bad that she's disabled and takes medication (if everyone taking Zoloft was allowed to commit crimes without guilt, we'd be in worse shape than we are now)....she was MUCH TOO AWARE for my tastes to even THINK about letting her go.

Geeze, are these what letters to the Loss Mitigation Departments look like nowadays??? That's incredible. I take medication, I commit crime, and I respectfully request that you lower the amount I borrowed fraudulently so I can sell my house and get off scott free.

Too funny. And somehow...not very funny.

What we DO finally agree upon however, is the fact that too many people ran and got real estate licenses, called themselves Realtors...and put a lot of people in bad situations. And those who didn't feel like showing houses became lenders in order to capitalize on the other free money that was flowing from every direction. But, if the bad Realtors don't accurately represent Realtors as a whole (which they don't)...then how is it that bad mortgage reps now seem to represent THEIR industry as a whole? They don't either.

This whole subject over the last several days is on how guilty the entire mortgage industry is, while the real estaters don't take a hit at all.

And whether you see credit reports in an agent's office or not does not release them from liability. It WILL make it tougher for investigators to indict them, as there isn't a great paper trail for Realtors who did bad deeds. It will require testimony from the buyers and the loan officer and the appraiser to ever convict a Realtor, and our court system is already too busy for that to ever happen.

BUT that doesn't vindicate the real estate industry as a whole, although I'm sure Lenn is going to love quoting facts and figures on how few (if any) Realtors were ever convicted of a crime after all is said and done.

I love this stuff.

Dave

First, I'll freely admit I didn't read all the comments. Sorry, it's late.

But what I have read bounced back and forth between faulting the lender and agent, the agent and lender.

Where is the BORROWERS responsibility in all this?

It's the borrower that signed his name to falsified income. I'm sure in many cases it's the borrower that flat out lied.

There is enough mess to spread the blame everywhere. Yes, there are unscrupulous lenders. And there are unscrupulous agents and buyers. There were likely all three involved in many instances.

You can't lay the blame on any one thing. Except maybe global warming.

LOL Jay...  I second that!  Great post Mike.

 

And for once I agree with John McCain..

McCain sees a more limited government role. "In some cases, lenders and borrowers alike were caught up in the speculative frenzy that has harmed the housing market," the Arizona senator said. "It is not the responsibility of the American public to spare them from the consequences of their own bad judgment."

My Motto "There Is No Right Way To Do The Wrong Thing" ... Shades of Gray My Donkey. 

If it's wrong it's wrong ... (Of course that depends on your definition of what "IS" is.)  Borrowers, lenders, agents ... a lie is a lie and wrong what ever the circumstance!

Please ... someone tell me we really haven't sunk that low! 

Mike - If you are suggesting that some real estate agents are not ethical, and that they will do anything for the sale, you are correct. I would also suggest that it might be in your best interest to avoid those guys whenever you can.

Wow.  Thanks for the lively discussion.  The one person I can guarantee is getting the most from this is me. 

Let's see where did I leave off?

Richard - Welcome back!  Always good stuff.

Jim Little - Pink Handcuffs?  Got any pictures?

Gene - Good for you on getting away for a respite.  We should all get away.

Tchaka - Thanks for the confirmation.

Aaron - Love the discourse.

Richard Parr - There is a grey area in between.  Go back and read Lenn's contest.  It was all about that grey area.  The b & w answer was yes you could do that loan.  The winning answer was "Yes, you could but you shouldn't."  Even today, in this market, there is a grey area.  Back then that grey was a whole lot wider.

Gloria - I've almost run out of outfits to wear.  I did send some out to the cleaners.  Should be back later today.  It's all about the accessories though.

Mike- You hit upon something that is still happening: " Matter of fact, it's still happening today."

Less than 30 days ago I had a client come to me for an FHA loan.  The file on the surface was fine, ran the approval and it was fine.  Things started getting ugly, the income was not the same as stated upfront, he spent his reserves and many other things.  At the end we had to decline the file.  The file in my opinion was marginal to garbage at best.  What did my agent do?

He called another lender who approved it with an FHA loan somewhere else that would take on way too much risk.  Now the file is done, that Realtor got paid and the consumer got the home.

I know that the consumer was the one pushing hard to make the deal happen.  I tried to convince the client to fix his credit and in 6 months we could approve him, but he did not want to hear any of that.

Folks this stuff is still happening.  Lenders are still taking too much risk (it will catch up with them) Realtors are still trying to make a commission because the agent feels his hands are washed, because he is not a lender.  The consumer will be blaming us all later if he defaults on the loan. 

How is that agent not involved a little?

Great Post by the way. 

Geoff - Great last paragraph!

Gary Bolen - Gary Condit?  Was he connected to Lee Harvey Oswald too?  LOL  Inman Connect?  Yeah.  Riding my bike there.  RE Bar Camp too!

Kim - I thank you for the comment and more than that I thank you for reading them all.  That makes two of us.

Stephani - Good stuff.  I loved your story.  Sorry your first house sucked.  Maybe you should sue your agent. (kidding)

Ardell - "A professional acts as he MUST not as he FEELS"  So True!

Karen - Are you my first groupie?  How cool is that?  There is no winning this battle.  If anything, I did get more people to think outside themselves and more about what their industry's role and responsibility was and is going towards the future.

David and Lisa - The borrowers always have final decision - but they rely on professionals and their guidance as well.  What if that Pro advice was misguided?

Tim - If you went to the Doctor office and thought all you needed was a shot to rectify some medical issue, what if that Dr. said "No, you should have this treatment instead."   Would that offend you?

Jennifer - Speaking of Costco - Did you know you can get a home loan thru Costco?  Ok, not really thru Costco they're actually shuffling them to LendingTree!  How's that for a Membership Benefit?

Lorie - See my argument with David and Lisa above.

Tina - Yup!  Them too!

Georgia - I did it just to get you to read.  I've always been a big fan of Lenn.  I recommend everyone subscribe and read every one of her posts.  This just happens to be one little item I disagree with her on.

Terry - No, he's stuck on the phone, on hold (right now) and just looks pretty.

Gena - I love your opinion!  Just like Lenn - I'm a big fan, and even though we disagree.  That's ok.

Wow that was a long one.

C'mon, people, dont we all know that Realtors never have anything but the best interest of the buyer in mind? Otherwise we are unprofessional, and unethical...

Seriously... pointing fingers at each other for blame is completely unproductive. Yes, there is blame ot go around, but the first step toward knowledge is seeing that there is an issueiving in denial, and are pointing fingers at everyone but ourselves. It is this that caused the problem, since noone was ever willing to see their role in the mess. Yet, all had a role, from the real estate agent, to the lender, to the mortgage broker, and especially, to the buyers themselves. It was asked above that "doesnt the lender have the final say" in determineing the loan? No is the answer, the buyer does, in many ways, since if they get turned down by this LO they will certainly seek another LO to try, and noone wants to lose business... that is, the realtor, the LO, the actual lender, and everyone else involved (appraisers, inspectors, etc.)

Fact is, it was the combination of product availability, and the "get in on the action" attitudes about the boom in real estate.

After all, did not the Realtors tell the buyers that there was no issues with these loans since the property would appreciate and the buyer could refi out of the package in a year or two... did not the LO say the same thing? Did not the appraiser confirm this by allowing more value to the house?

Each and every participant in the transaction has the ability to mislead, to propagandize, or to just plain "sell" the buyer on the various aspects of the deal. And most use their influence to help close the deal. So if you did not close any deals, you were not responsible. Otherwise, you had your share in the debacle.

Just my two cents, adjusted for inflation...

POLEASE!   REGULATION - ETHICS - MORTGAGE COMPANY POLICY - let's leave blaming real estate agents to something that is specifically a real estate ethics issue NOT a LACK of REGULATION, UNETHICAL LENDERS, AND A NATIONAL POLICY OF TOO LITTLE BANK REGULATION (THEY'RE ABOUT TO CLOSE THAT DOOR NOW, AFTER THE HORSES ARE LOOONG GONE)

Sorry I'm shouting but there's way too much blame shifting and can't we all share the blame going on here.  These are bad mortgages, not bad houses!   Get Real!

It looks like this topic struck a nerve...I agree with Gloria that there are many parties to "blame."  I am a loan officer who was told by a realtor that, after I had decided not to do business with, I was not ready to "swim in these waters yet."  That meant I wasn't ready to falsify W2's, the inflate income, to fraud a verification of employment, etc...I also experienced AE's from lenders who said, "just send it in," meaning they would get the documentation and make it work.  Still, I had conversations with borrowers who new the system and lied about everything.  We all contributed to this mess-- lenders, realtors, clients, appraisers, congress, everyone. 

Dave it was 133 today, imagine that. My opinion remains the same, it's the lenders fault. By lenders I primarily mean the banks, not the fly-by-night loan officers that jumped on the bandwagon. They were just thieves doing what thieves do. The borrowers hold blame as well, but when you leave candy on the table as banks did, kids will take it.

If the banks aren't responsible to lend the money in a responsible manner, then how is the Realtor? Buyers would have gone directly to the sellers and bought the same homes at the same price with the same loans, even if all the Realtors vanished. I've got enough to deal with in life, I can't be responsible for the banks money, that's their job.

Aaron - Thanks for coming back with that story.  How many times does that happen?  Isolated incident?  I think not.

Ruthmarie - I'm almost out (protective clothing)

Above All - Good point.  very good point!

Liz - If you find it.  Drop us a link.

Michael - I have to ask.  What are you doing in Iraq?  How's the RE market?  No really.  Can or is there any real estate selling going on? 

Rick - It was all the Home Inspectors fault.  Wasn't Gary Condit a Home Inspector?  Lee Harvey was.

Dave - The striking part of that letter, "Using "Platinum Computer Co", a fictitious company for job verification" I remember having Wholesale Lender reps telling me how to create a Fake Business Cards to prove they were self employed.  That's all they needed.

Jay - That's very true.  I've also done second opinions where the borrower didn't know they were going "Stated Income"  or NINA.  It was the LO that structured it that way to make the deal fly.

Candace - Thanks!

Lisa - It's not always black and white.  There's also a lot of grey in the middle.   See the link to the Lender Contest Lenn put on.  It was big time grey.

Eizabeth - Not suggesting it, I'm yelling it. Mortgage Brokers too.  Probably more in that group than Agents.  But that's not my point.  My arguement was against Lenn stating that Real Estate Agents had NOTHING to do with the mortgage mess. That's all.  Now if you can just provide me a list of all those Agents you know are unethical, I'll be happy to avoid them.

Gary - Yup!  Very much happening today.  Thanks for the story.  And thanks!

Rhode Island - Thanks.

Don - maybe I'm reading that wrong, "let's leave blaming real estate agents to something" and then "can't we all share the blame going on here" doesn't jive.

Mike---

As I just posted on Lenn's blog, how does she explain these?

Las Vegas Couple Accused of Bank Fraud, Money Laundering

http://www.federalcrimesblog.com/2008/03/las-vegas-couple-accused-of-bank-fraud.html#_ftn1r

This REAL ESTATE AGENT and her MORTGAGE BROKER HUSBAND are accused of fraudulenty orchestrating more than 400 transactions involving more than 200 properties with a total purchase price of more than $100 million.

Or how about this one involving $18 million in Utah??

http://deseretnews.com/article/1,5143,700242958,00.html

According to the indictment, the group, who held various positions in the real-estate industry, formed a network to obtain a series of loans on properties at Provo's posh River Bottoms area.

Or how about this one involving 100's of people and close to $1 BILLION???

http://money.cnn.com/2008/06/19/real_estate/mortgage_fraud/?postversion=2008061914

WASHINGTON (CNN) -- Hundreds of people across the country have been arrested by law enforcement officials targeting crooked mortgage brokers, real estate agents, and other industry officials, the head of the FBI and a top Justice Department official said Thursday.

There are hundreds of stories like it and many more coming.

How about income tax policy?  Are we actually going to have a discussion about who is to blame and no one brings up our tax code, which rewards people for buying and refinancing at the highest Loan to Value possible?    There are many, many refinance transactions, driven by tax code, that ended in foreclosure.

I think we are just having fun debating..... pointing fingers is just happening along the way..... I think this is a fun post and a fun site....

and yes, I did know that about Costco.. I couldn't believe it when I would follow up with someone and they told me they got their loan there... EVERYONE was in the biz it seemed like to me.... I met a realtor then lender now court reporter last night at dinner... she has hung it up... geez, she must have been in the biz for 20 years.... I've enjoyed the banter.... just for fun...

I just had to check this post out.  Lenn Harley, wrong???  Great post title.  There were a lot of pressures on loan officers to give generous pre-approvals and we can't overlook that this is a systems issue, not limited to the moral failure of the lending officers. 

Hi Mike,

I've been away from AR now for a couple of months and read your post this morning.  I only got through about the first 10 responses then had to stop reading. 

After disengaging from this site for a while, I can now see why I stepped away. 

To your point, who is respsonible for the bad loan?

The borrower. 

Broker got their fee, agent got theirs, the bank got theirs the investor got theirs, well, you get the point....

Once buyers and banks take responsibility for their loans, the whole industry will be better off.  They will stop taking advice from unthical L.O's, R.E's and Lenders.  Our job is to advise our clients on what is a good deal and what is not. If more people in this industry looked after their clients best interest (fudiciary) we would not be in this mess, period.......

All agents and L.O's  that read this, should count the number of clients they have in foreclosure now and reflect on whether or not they gave good advice under the circumstances.

You can pass the blame to whomever you want, but the fact remains, your client is losing or has lost their home and you must take a good look at your part in that. 

Or not!

 

 

Mike, I like your photo comparison between the Unhappy Burger Flipper and the Happy Burger Flipper.  Which is which depends on whether the photo was taken before or after the foreclosure papers were served!

Mike, Kudos to you for rallying to the defense of the mortgage industry. When I read Lenn's post I like you perhaps, and many perhaps, wanted to laugh hysterically, cry, then respond, but didn't want the smackdown. Out of touch falls leauges short. Rockville, MD: is that a planet in our solar system. Good Grief!

Mike, I do not have time to read the 147 comments so without any connection to the above I will add that I personally, a Realtor since 1991, have never pushed a lender to approved a clients at anything other than what they truly qualified for. I would never feel comfortable knowing my clients were pushing to buy higher than they could afford....maybe I'm old fashioned but I also have done very few variable rate sales for the same reason.  Sorry, I'm with Lenn on this one but I'm sure there is enough blame to go around!

H Everyone...

To a comment above, hopefully no one is "finger pointing", "placing all the blame", etc.  It happened, and there are many too many factors to oversimplify who did what to who when.

I did fine the article and thought this might be a good place to put a link, as Mike had ask me to do.  It was sent to me via e-mail, maybe from someone here?  It was in Time magazine, the cartoons and graphics are really fun, so I encourage everyone to check it out.  Let's all stop "finger pointing", talk responsibility for OUR ACTIONS, and hopefully other will take responsibility for theirs.

I plan on doing another post citing this, but for now, let me know what you think after reading this.  Will it have any affect on your life?  Liz

Recommendations for Citing this Document

On a Website

http://tobaccodocuments.org/pm/2046323556-3564.html

As a Footnote

Time; Birnbaum, J.; Elson, J.; Morrow, L. "Time - Busybodies & Crybabies - Whats Happening to the American Character?". 19910812/P. Bates: 2046323556-2046323564.
http://tobaccodocuments.org/pm/2046323556-3564.html

Diane - Lenn contributes a lot to AR and I enjoy reading much of what she writes.  Having said that, how can you tell us that you support what she says because you've never pushed a lender to approve clients in an unethical manner?  In effect you're telling us that the determining factor in whether or not to blame LOs is based on how YOU personally have done business in the past.

Just a guess here but I think the actions of several million others also factor into the equation.

Mike is right; during the boom, whoever got the job done became the person who received the referrals. This process begat more and more agents, LO's and appraisers who pushed the envelop to make the next sale.

Great points!  Everyone shares the blame, INCLUDING real estate agents...

I'm sure there are agents out there who have done this, but I have encouraged some of my buyers to wait until they can actually afford it. Someone has to explain to them that there is more than just a house payment involved. There are utilities and insurance and taxes and probably PMI and, if possible, life insurance, and the beat goes on. The thing that real estate agents must remember is that they are trying to build clients for life. If clients get themselves in over their heads, they will think of the agent who they may feel was in it just for the commission.

Aaron,

There is some talk that the mortgage industry may in the future, in some parts of the Country, be held to a fiduciary standard.  Conversely many if not most States hold agents accountable to a fiduciary standard.

It's not about how you act or how you feel.  It is not a position I take against your industry.  It is a fact...an absolute fact...that a consumer cannot hold a professional to the level of care of a fiduciary if their license does not require it.

That is why I say it is more the fault of "the fiduciary in the room" and not the lender.  You can take personal offense if you choose, but that only proves that you don't "get" what I am saying.

If it weren't for the suits, I would have never made it this far.

It may be different in more urban parts of the country, but here we were warning our buyers to be more conservative. I never told a LO what we needed. He or she spoke with the buyers and make their own determinations. I also never said more than "hello and good-bye" with appraisers. Sure with some smoke-and-mirrors or fancy loan programs, some buyers could qualify for a much larger home, but was that the wisest move for them? Sadly, often they used mortgage brokers that we were not familiar with and could not be persuaded to at least check others out. I cannot tell them who they can and cannot use. Buyers need to make those choices. Those of my clients who used reputable brokers and used their own common sense concerning their finances are now happily living in their homes. The others are the ones calling me frantically to see if they can sell short. So in many cases it was some mortgage brokers that encouraged buyers to over-extend themselves. However, I am sure there were many less ethical agents who also wanted that "big sale" instead of one that would have better fit the budgets of their buyers.

PS For those that keep saying real estate agents have a fiduciary relationship with all their customers, that is not true. At least not in Florida. If I am operating as a Single Agency, then I do have that type of relationship. But if I am working as a Transaction Broker (Dual agency being illegal here) or in a Non-Brokerage Agency, then it is NOT a fiduciary role. I am sure many other states are that way as well. So be careful with that term.

There is always an alternate viewpoint. Thanks for presenting yours. Great conversation here.

I have a good friend who is a realtor.  She put it this way:  The bank gave me a loan and they shouldn't have and I took the loan and I shouldn't have.

John,

Here's the quote: "The LAW in most states requires..."

Florida is one of the only states that outlawed dual agency and replaced it with Transaction Brokerage, etc...  I was selling real estate in Florida the day that happened.  It was a dark day :)

well put Mike, thanks for the very well written response.  

Mr. and Mrs. Greedy were the main culprits and now that "The chickens have come home to roost"...it's everyone else's fault but their own!

As if prices were going to increase forever---don't you remember the ‘90's!

Ardell- Sorry it took me so long to reply. I had a couple of closings yesterday afternoon.

It's always best, when making statements of "Fact- absolute fact" to actually have the facts.

In the state of Washington, where mortgage brokers are licensed and are required to pass examinations (just as Realtors are) they actually are "the fiduciary in the room" and with your statement that   "There is some talk that the mortgage industry may in the future, in some parts of the Country, be held to a fiduciary standard." you should know that the "FACT" is that the future is now, and has been for some time.

The Washington State Legislature, in outlining the legal FIDUCIARY DUTIES of mortgage brokers, passed legislation in the form of Revised Code of Washington, RCWs > Title 19 > Chapter 19.146 > Section 19.146.095 as follows:

RCW 19.146.095 Fiduciary duties.

(1) A mortgage broker has a fiduciary relationship with the borrower. For the purposes of this section, the fiduciary duty means that the mortgage broker has the following duties:

     (a) A mortgage broker must act in the borrower's best interest and in the utmost good faith toward the borrower, and shall disclose any and all interests to the borrower including, but not limited to, interests that may lie with the lender that are used to facilitate a borrower's request. A mortgage broker shall not accept, provide, or charge any undisclosed compensation or realize any undisclosed remuneration that inures to the benefit of the mortgage broker on an expenditure made for the borrower;

     (b) A mortgage broker must carry out all lawful instructions provided by the borrower;

     (c) A mortgage broker must disclose to the borrower all material facts of which the mortgage broker has knowledge that might reasonably affect the borrower's rights, interests, or ability to receive the borrower's intended benefit from the residential mortgage loan;

     (d) A mortgage broker must use reasonable care in performing duties; and

     (e) A mortgage broker must provide an accounting to the borrower for all money and property received from the borrower.

So, do you "Get" it now?

It is, in FACT, how I "act and feel" and further, how I am regulated by law.

Again, when discussing "facts" please actually know them ahead of time.

With my clients (and, I'd like to believe, a significant number of my lending associates) I have always held myself to the ethical standards that are a part of my personality, without the need to be legislated that way. However, for those in the lending business who do not posess this inherant standard, it is spelled out for them legally.

Fiduciarily yours,

 

 

This is good.  Some nasty just alerted me to your post.  I can't disagree with anything you write.  Except, of course, that mortgage loan applications and credit reviews are not done by real estate agents. 

It was your featured post that insprired my post.  It was as though real estate agents were gratuitously included in those responible for the mortgage mess.  When our beleagered agents are dragged into responsibility for the mortgage mess, I just have to ask how.  I suppose it's a reflection of the respect for all of the hard working agents out there who are usually blamed for anything that goes wrong in any transaction.  It appears that the link is overbearing agents who turn buyers on to less than ethical loan officers/underwriters/lenders, et al. or whatever.

Sorry you didn't participate in my little contest.  I wanted input for one of my web pages and thought that was a good way to get it.  In fact, I did.  The loan officers who responded each got 2000 points and I alert them when I get a question from a consumer.  I didn't get a great response, but I appreciate the help I did get.  The loan officers get a good text link to their web pages and I hope a little Google juice. 

I know my place.  When a consumer asks a loan related question, I try to get a loan officer to answer it.  The participants get a link back to their web site which, to anyone who knows Google, is or could be valuable if the web site is important to their business.

My opinions about the responsibility is a reflection of my experience reviewing over 1,000 contracts of sale and attending many closings and attending about 100 mortgage loan applications. 

In fact, just this week, a local loan officer wanted to falsify a buyers employment letter.  The buyer and the loan are history.  All we lost was a sale.  Would the buyer have gotten the loan with the falsified letter?  Sure.  But, what if that loan was audited? 

And the beat goes on.

 

Wow, I think Aaron just coined a new term......

Now that I have gotten thru BOTH posts (and it took a while) and have had the hundreds of updates overrun my TREO's memory card, I can honestly say the majority of the posters on both sides 1. didnt really get the point of the posts and 2. both sides of the argument are saying the same thing...just from their respective points of view.....  What we should be considering is the "cosa nostra" that is today (not the mafia definition but the literal...this thing we have)... Where do we go to fix?  I have a different perspective as I am a REALTOR that works for the Lending industry.... I sell REO properties.  While this recent crisis is creating a bumper crop for my business, it is sad and unfortunate.  Not to shoot myself in the foot here, but how do we fix this?  Corrections are being made in the money sector, Our state (at least) is toughening licensing laws and increasing awareness for the folks on the other side of the aisle (money folks)....With this new cycle in the market (we all know its cyclical) turning down, the Real Estate agents who have "gotten in while the gettings good" during the boom time are washing out... As is I would hope a lot of this fraud/greed/unethical way of doing business.  Just like the phrase "a lock is only meant to keep an honest man out", there will always be those who want to skirt morality and good business sense, just to make a buck.  I think the majority on both sides however will adjust business practices and correct bad procedure.  I have been careful not to point here, and its just an observation.  Many have said there is enough blame to go around and it is true.  I feel that this will all turn around (as it historically has).  I just hope it can be tempered for the next upturn.

One more thing.... Since we both sides have been called parasites,  i think it is important to remeber we have a symbiotic relationship...when all this clears...we will still have to work together.... to quote (Jack Nicholson I think)"can't we all just get along???"

One more thing......Since we are pitting each side against each other why hasn't anyone said anything about (and I tried to read all of the comments) the LO who is was also the RE in alot of those dealings, taking money on the back side of every deal, talk about the ability to be unethical.  It seems to me that if you are a RE then that's what you should be, not a LO.  I personally think you should not be both EVER!!  Just my opinion,

I was a Broker in Charge at a former office and I inherited one of those when I took over.  After seeing the first HUD 1 I told him he had to make a choice, that I wasnt going to allow that in my office.  I felt that although legal, it was a definite conflict of interest.  Oddly enough.....he moved to CA.  (LOL)... I believe that is way too many hands in the cookie jar...

Rudy, it truly amazes me the number of REAgents that are also Loan Officers.  I honestly have issue with doing business with them as the selling agent.  I tend to scrutinze the contract more and will definately ask for back-up offers on my listings.  I'm not saying they are all unethical but it does make it easier to be.

Geanne-

Kind of stretches the arms length transaction thing a bit no??? 

For all let me elaborate on that deal...

The deal I was referring to was in the works prior to me taking over.  After reviewing it, I asked the agent how was he going to face his client with all the junk fees (yes...document retention and such are junk fees, a 3% origination fee, and earning a 3% sales comission on top of it.  I of course got no answer.  It is just for that reason that I stopped the practice in my office.  I am not saying that the agent or that practice of writing your own loans is unethical in theory, just that is gives the impression of impropriety.... you dont have to necessarily lay a mine field in one of your enemies harbors....you only have to suggest that one may be there....  At any rate, both are professions.  A true professional is committed to being on top of his/her game to the point where it takes all the working time.  How can you strive to be the best in both fields?  I dont think its possible.  Luckily, in NC we dont have a whole lot of that.  Our Franchise has its own mortgage company, which is serviced by travelling reps.  Its all handled by fax/email/phone and that is fine if someone doesnt want face to face.  We do not however have in house financing. 

Someone in both posts mentioned that they wouldnt want to work with a client that had interviewer with other lenders.  I dont know if they meant interviewed or interviewed and turned down....I typically dont have a lender in pocket.  I have used several, just based on the facts that clients ended up with them.  I do it for them to see who is more competitive...Who can give them the legitimate better deal (do not read into this who will bend the rules to get them qualified).  After all, most sellers interview several agents prior to listing their homes.  That is why we have listing appointments.  They are trying to find out who will do the most or best job for them , for the money.  As with most things I think getting back to the basics, the golden rule and common decency will help to turn things around.

For the record, I am the "nasty" alerted Lenn to your post.  She made a comment on her post about not hiding under a rock so I questioned why she only responded to comments on her blog from those who shared her opinion and either ignored or resorted to name calling to those who did not.  I also questioned why she didn't bother to respond to your post.  Apparently she wasn't aware of it (much like a lot of other things).

She both ignored me and called me a name.  I'm impressed.

The real test of who is right and who is wrong is how someone responds to critics, questions  and opposing points of view.  That's why we have cross examinations in the courtroom. 

Maybe you should schedule a videotaped debate???  Or would that not generate enough "google juice"  ?

OK. Wait a minute. As REALTORS, we're supposed to supply contact info for THREE loan officers. I personally do not choose for my buyer. They call around... sometimes to my recommendations and sometimes to their own, and THEY choose who they use. I never, not one time, tried to get my buyers approved for more money.

But then I work mostly with sellers.

That was my point....

 

Oops forgot to sign in sorry.....

Aaron,

That is only recently the case...no?...and not equally applied to all in the lending industry...no?  Wasn't that instituted because of the problem and not before the problem was at irresolveable magnitude?

In any event, I enjoyed the exchange.  People don't get "riled up" unless they have a passion for what they do.  If all lenders feel it is their problem to solve and all agents feel it is their problem to solve and all buyers feel it is their responsibility to be fully aware...we will be on the right track.

Ardell- You are right. The fiduciary duty imposed by legislation is only a recent law here in WA. My point all along was for you not to not label ALL lenders as having no fiduciary responsibility, and with the innacuracy in stating that lenders have no legal fiduciary responsibility, but instead were just "salespeople". Some don't take the responsible stand, and some are not legislated to. It is difficult not to be offended when one is labeled using a broad, all-encompassing statement.

That being said, as I said in my original post, "The only way to find a solution to a negative situation is to work together." Trying to blame, and to label a group as a whole with a derogatory term (although I've never thought the word "salespeople" was a negative term myself) accomplishes nothing more that getting people's backs up, making it very difficult to move forward to a positive resolution.

It will take the professionals from both sides of the real estate industry who take the term "fiduciary" as it's meant to be applied (and not legislated) to recover the public trust.

I hope you will join me and others who feel this way in a mutual atmosphere of respect to bring the recovery of trust about. Legislating it won't accomplish what needs to be done. It has to be accomplished because it's how we "feel" it should be.

Rudy- Thanks, I'm thinking about copyrighting the term "fiduciarily"!

Regardless who is to blame...... it seems like their was a false sense in how much more the properties would appreciate.... I told lots of my clients, regardless of what they qualfied for, that they were buying in an extremely inflated market..... and when they were cashing out they better be sure to use the money wisely in case the values went down if it were a refi.... just like the realtors saying "I'm not responsible to qualify them for a loan, blah blah blah," I made it my responsibility to tell them they were buying in one of the highest priced markets in my history.... all we are asking is if the realtors did the same???????? it is a simple question.... did you advise them not to buy with the current prices???? did anyone advise them of what a bursting bubble might look like???? there are two parts of a loan everyone.... the buyers side and the properties side.... the value, the expectation of equity increase.... people are not only walking away because the payment went up, they are walking away because the value went down.... why weren't they coached on that is all I am asking?????

Pardon me for asking what is probably a question with a simple answer. Why would someone walk away from a mortgage on a home that's value has decreased? If they can afford the payment, and are in the house for a few years yet to come, the value will (in all prior real estate corrections) come back up to where it was, and probably go above that.

But I do agree that, at least in the time I was in SoCal, each month that went by for the three years I was there, I told clients not to bank on the values to continue their 25+ percent annual increase that was happening at the time. Lots of LO's were selling 2-5 year ARMS by telling the clients "don't worry- when it's time to refi you'll have oodles of equity even if the rates are a little higher!" Criminally irresponsible of them. We're certainly reaping the bitter harvest of that viewpoint now. 

It's unfortunate that every industry has its, let's say, ethically challenged members.  I cannot tell you, though, how many times I expressed concern with my clients about a loan they were jumping into.  In many cases, a freight train wouldn't have stopped them from making that mistake.

WOW!  I never thought this would be as polarizing as it has turned out.

I thank everyone for voicing their opinion. (even those I disagree with).  Thank you for keeping the conversation spirited and civil.  I love the associated side debate between Ardell and Aaron.

Just a couple of thoughts. 

You know how I feel. I don't shirk the responsibility that loan officers played in this mess.  If anything hits my hot button it's when someone suggests, "It wasn't my industry's fault!" whatever industry that may be.   That goes for the borrowers themselves.

I hold a slightly different view than most when it comes to the actual Lenders.  I feel that Lenders were simply acting as a business.  In the simplest form, a business is "in business" to generate income.  It's as simple as that.  "Helping homeowners achieve their dreams of home ownership..." is just advertising B.S. from a Lender.  Can you put Lenders in the same box as Tobacco companies?  Perhaps.  (thanks Liz)

Lenn - a special thank you for responding.  We agree on so much more than the few points we disagree on.  I subscribe to your blog via RSS.  I value your opinion more than you know.  This was not an attack on you personally, just a response to one particular point of view that you voiced.

I'll be at Inman Connect this week, so my responses will be slow and limited.  It's a shame because I just got a whole batch of new suits out of the garage.  I plan on interviewing as many people at Inman as possible there.  Would this be the best question to ask them?  Or would it be the worst?

Let's stop the blame and keep on fixing.  The lender makes the final decision.  The buck stops there.

Maya Thomas done did wrote:  The lender makes the final decision.  The buck stops there.

Even if they rely on appraisers and agents who might be doing something underhanded we're supposed to lay it all on the lenders anyway?

 

Sorry to disappoint you, the underwriters are the final word.  They have seen enough proper loans and they know when they are being fudged.  The underwriter can call to verify anything that is on the loan application, employment, funds, w-2's etc...

If the banks don't approve the loans, they don't get the doc prep fees, interest on the funds loaned.  They are the ones willing to take the risk.  Now the home insurance companies can kill the loan if they don't like the borrowers credit.  The PMI companies should have better protected themselves.   If the government bails out the banks on this one, we will all be majorly hurting.

You're not disappointing me....if anything, you're just not clued in.  But that's ok, you're not alone.

You naively think that UWs have all the tools available to them but you refuse to recognize that some of those tools are based on info provided by others.  Do you really think it's all about the the borrower's income and assets?  Does the borrower do the appraisal as well?  Go back to the beginning and read Mike's blog post and think thoroughly before posting on here.  There are many different entities that all share in the blame and to place that on the lender/UW alone is assinine.

Mike,

I did not even think about reading all the comments - that is your job. And I will forgive if you fail to get to this comment. Real estate agents and customer alike knew the game - I still get requests for stated or bank statements documentation.

We put pressure on appraisers and on lenders.

We pressured and we caved. And there were plenty of times when I had to explain to others why another broker could close a loan that I could not close.

Even when we all were caving in and pressuring, there were lines I could not cross. But there was always someone who would cross that line.

Now I am hearing about lawyer assisted credit repair, which at its extreme is actually more like creating a completely inaccurate credit history.

Is this any better? Lying about income or about the home value or about the credit history. Using a lawyer does not make it OK, does it?

Will I be pressured to follow suit, just to stay in the game? Will I soon hear from an agent that the LO at the other place will just put the clients in credit repair and get them qualified? 

Richard

Hmmm, I've always wondered why lenders were not held to the same standards of practice as Realtors.  This whole thing is like the Poseidon Adventure...the subprime mess is like a rogue wave coming from the middle of nowhere, taking a lot of people down (agents, lenders, banks, 'investors', and property values), only a few will survive.  Stay tuned.

Tamara,

In answer to you, please see my post above on 7/20 at 12:04pm. Again, it's always best, when referring to a particular group, to not make all-encompassing statements such as "wondered why (all) lenders were not held to the same standards of practices as Realtors."

If one were to come on Active Rain and say "all Realtors are shysters" because one had had a horrible experience with one, I feel fairly confident you (and probably a minimum of 5000 other Realtors on the board) would rise in righteous indignation- and justifiably so.

In the past, I know of loan officers/brokers who've had licenses yanked by the state's for fraudulent practices, just as I've known realtors to have the same done.

Again, as I've said before, I hope that all of us here, Realtor, broker, loan officer, appraiser, etc. who hold themselves as ethical and responsible professionals, can work together in mutual respect to weed out the "bad apples" and win back the credibility of the public that has been lost due to this meltdown.

Thanks!

Yes our job is to qualify buyers.  Not only to approve them but to decline them for excessive loan amounts we guide them but again now and again buyers always want to push the envolope too!!!!!!!! The blame is not on only one side of the equation with out the loan we have no purchase as the Real Estate goes and the buyer can't buy without the loan and the LO doesn't eat with out the Loan but the lenders are the ones who set the products and it is up to us the LO to find the right product and financing for each and every buyer.... We are always careful but not perfect we should always try to watch the buyers best interest......

I'm so very late to this fiesta.  I'll be back, before I am... very nice job, Mike.  You pot stirrer:-)

I think this recent video I saw on Yahoo News says alot.  Leave the politics out of it and listen to what he says.....

http://cosmos.bcst.yahoo.com/up/player/popup/index.php?cl=8945671

 

Rudy, good video.  It is true, but this does not mean realtors, title companies, appraisers, etc... did not play a part.  I don't think he said that.  These lenders made some good decisions on loans that were fraudulently presented to them.  Every person I see from the mortgage side seems to think both sides, if not every profession within the industry, including borrowers, played a part in this mess. 

Don't know why you, Mike in Iraq, and a few others keep trying to push the blame on one part of the industry. 

Aaron gave plenty examples of realtors that were guilty.  I have seen tons of stories with people from all professions within the mortgage industry in the headlines.

Do you really think only Mortgage companies and Wall Street are to blame?  Not every person was guilty, but there were people from every profession that were guilty.

It's time to put that argument down and realize all professions played a part and stop trying to point the finger.  The vast majority in these blogs feel that everyone played a part.  It's overwhelming.  And, I have personally discovered and investigated tons of fraud from brokers, loan officers, realtors, title companies, appraisers, and borrowers.  The underwriters and Wall Street had some many fraudulent loans submitted, it was impossible to find all of them.

Mike, I can remember havig to let a loan officer go because he manipulated the numbers just to make a deal work. And what he could not figure out was he closed 10 loans that month.

Loved the dialog on both posts.  Some points were relevant, some were hasty.  While I try to be a solution type of guy, knowing parts of the problems is vital to ensure they don't happen again.  I think Bob Lowery's comment above hits the proverbial nail on its shiny, little head.

Off with the fingers now, let's help solve this situation.

Well done, Mike.

Wait a second Sardi.  It took you how long to come back and comment?  Were you abducted by Aliens or something?

I can't tell you how many people came up to me at Inman and thanked me for "having the guts to write that post." 

Sorry, it wasn't guts.  Just a gut reaction I guess.  And you are welcome!

I just ran across your blog, I don't have time to read ALL the comments and would just like to say:

How about putting some blame on the consumer.  The one who has to have the house, claims they can afford it and will go to all ends of the earth to find a lender to get it for them!

I have NEVER recommended to a buyer to purchase more house than they can afford.  I have turned AWAY business because the buyer is lying about income.  I just won't be any part of a shady deal. Not happening - not in my lifetime.

There's my 2 cents. 

Mike, ever heard of "personal responsibility"? Seems to me, there is plenty of blame to go around, but the final decision is always the buyers/lendees.