Our latest guest post is from the writer of TheTruthAboutMortgage.com, sharing insight on his past experiences as a wholesale Account Executive:
Weve all heard about the mortgage mess, the subprime blowout, the bankrupt lenders, the sharp increase in foreclosures, and the declining home prices, but how many people actually know what it was like working on the front line?
I can tell you first-hand what day-to-day operations were like, and Im sure any other Account Executive would echo this. I worked for a wholesale lender that rose quickly, and fell sharply to its demise, all in the matter of a few years. It kicked off with company cruises and concluded with $2 bottles of champagne.
I worked as an Account Executive, the intermediary between the loan officers/brokers and the wholesale lender. My job was to originate loans, though the job detail was more about lies and fraud above all else. There were so many instances of it, in so many forms, and on so many levels, that after a short time I became numb to it all.
Looking back, it shocks me that so much of this went on, and was so seemingly normal. And when things finally began to tighten up, people got irritated, mainly because doing the right thing wasnt nearly as easy as doing it any way you pleased.
I remember one specific situation where a loan was nearly funded and the Account Manager had called the borrowers employer to verify employment information.
The employment information on the 1003 (loan application) said something to the effect of Real Estate Executive earning $20,000 a month, but a phone call to the employer revealed a much different account.
It turned out the borrower was actually employed as a loan processor, undoubtedly making less than $240,000 a year (sure some may have been making that during the boom, but that was not the case here).
In any event, you would think the loan would be dead, considering the borrower lied about their income and employment on a legal document.
Well, not the case in the mortgage industry. Instead of the file being declined, it was uplined to the VP of Underwiting who massaged the loan, probing and searching for some way to make sense of a lie. After all, the loan was worth $1.5 million, so clearly the company had no intention of throwing it away. And if it could be cleaned up a bit and sold to the investor, no one would be the wiser.
After some research, it came to the VPs attention that the borrower was a licensed real estate agent, and just like that the 1003 was miraculously changed to state that the applicant was a loan processor and a real estate agent, earning the originally stated $20,000 a month.
So in essence a file that shouldnt have closed was on its way to the funding department. And had the investor ever known about the series of events that transpired the loan would have been sent back to the lender in an instant. But how would they ever find out, or even assume anything was wrong with a seemingly well put together loan?
I could tell you a thousand similar stories, but Ill highlight some more common fraudulent practices that took place frequently.
On a daily basis I saw Account Executives change information on borrowers applications and other loan documents, whether it was taking a signature from one document, cutting it out and Xeroxing it onto another, forging a signature, changing a date, or manipulating information in the computer systems.
In fact, instead of being supplied with the proper income on stated deals, many Account Executives would work backwards, inputting estimated monthly income to find the appropriate debt-to-income ratio for a loan. Remember, it wasnt about the truth; it was about what would make sense to the underwriter, which in turn would make sense to the investor.
I cant even tell you how many times I would see bank statements faxed over with payroll figures littered all over them, sharply contrasting the income these borrowers would state on their loan applications. Of course that wouldnt matter, AEs could always request a different set of assets, tear out a page, request a verification of deposit, or simply black out the payroll numbers.
And if all that failed, you could always change the borrowers documentation type from stated income/verified assets to stated/stated. Just like that, problem solved. And if that didnt work, take the borrower down to no doc and trash the income and assets docs entirely.
All of these practices were highly illegal, but were so commonplace that many looked the other way, and after awhile, likely became so desensitized that they didnt even realize they were breaking the law.
It was these very practices that perpetuated the problem, because anyone whos worked in the mortgage industry knew there was always a way to get a deal closed. There was always a solution, someone they could talk to in order to make things right.
Lets face it, the mortgage industry didnt know how to digest the word No, and now were all paying the price.
TheTruthAboutMortgage.com is a mortgage blog covering the latest industry news and gossip, while providing practical mortgage advice and helpful homeowner tips.
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[Source: Blown Mortgage]
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