Over the weekend, I was hard at work on Bailout Nation. I wrote these paragraphs on Sunday:
"Mortgage brokers became very creative at working the system for evaluating mortgages. They kept track of the various standard and adjustable mortgages available from different underwriters. They astutely identified the "easier" banks, and steered applicants there.
And those were the legitimate brokers. Unfortunately, the unregulated mortgage industry seemed to attract all sorts of unscrupulous players. Unlike the stock market, mortgage brokers require almost no licensing or training in most of the country. After the 2000-03 stock market crash, many retail brokers found themselves looking for a new line of work. Some had simply tired of the daily market grind, while others where under investigation, suspended, or even permanently banned from the industry.
Many with "hard-sell" phone pitching experience found a ready and waiting home in the mortgage industry. A YouTube video (since pulled) from 2005 showed several mortgage brokers working the phones in a scene that looked like it came from the movie Boiler Room. Aggressive salesmanship, cold slamming, up-selling were all common. Many mortgage borrowers have claimed they believed they were buying a fixed rate mortgage when they were sold a higher commission, adjustable-rate mortgage — with a significantly higher reset payment."
I was wondering if I wasn’t being too harsh on these brokers — after all, they all weren’t corrupt criminals , and I am sure many are honest hard working folk.
Then I read this in the Miami Herald:
Gary Kafka, former body builder with a long rap sheet and violent
past, wrote millions of dollars in mortgages in South Florida without
ever applying for a state license.
Fresh out of prison after serving time for bank fraud, he never went
through a criminal background check before selling loans. He never took
a competency exam.
He never had to…
There are 3 articles in the series; 2 are already published.
Here’s some more stunning details
• From 2000 to 2007, regulators allowed
at least 10,529 people with criminal records to work in the mortgage
profession. Of those, 4,065 cleared background checks after committing
crimes that state law specifically requires regulators to screen,
including fraud, bank robbery, racketeering and extortion.
• More than half the people who wrote
mortgages in Florida during that period were not subject to any
criminal background check. Despite repeated pleas from industry leaders
to screen them, Florida regulators have refused.
• Confronted with a growing epidemic of
mortgage fraud — Florida now has the highest rate in the nation — the
number of license revocations declined over the last five years,
leaving borrowers at the mercy of predatory brokers.
• During the peak of the housing boom,
the Office of Financial Regulation ignored a state law enacted in 2006
that compelled it to perform nationwide criminal background checks on
applicants. That failure allowed people convicted in other states –
and in federal court — to peddle loans in Florida without any scrutiny.
• Regulators allowed at least 20 brokers
to keep their licenses even after committing the one crime that seemed
sure to get them banned from the industry: mortgage fraud.
The entire series is a brutal takedown of the mortgage origination and brokerage industry. Its a must read work . . .
Funny, there was no mention of any Predatory Borrowing . . .
Thousands with criminal records work unlicensed as loan originators
MATTHEW HAGGMAN, ROB BARRY and JACK DOLAN
Miami Herald, July 20, 2008
Ex-convicts active in mortgage fraud
JACK DOLAN, ROB BARRY and MATTHEW HAGGMAN
Miami Herald, July 20, 2008
Part 3 tomorrow
Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.