Virginia Beach Home Loans: It's All About Performance Baby... The Truth About Brokers; What's your grade?

It's All About Performance Baby... The Truth About Brokers; What's your grade?

I'm not putting any flashy pictures or exotic text in this post I just want to point something out. I saw a news broadcast recently that focused on the lack of ethics within the "mortgage broker" community. the entire hour long broadcast talked about the economic turmoil that we are in and blamed mortgage brokers.

The people (so called analysts) on the screen unequivocally agreed that the only way to go is with a bank and that if you go with a mortgage broker you will get "screwed"! I watched with absolute disdain for the entire hour... For these people to call themselves analysts and to talk for so long about something that they do not entirely understand is mind boggling.

They kept using words like "predatory" and "unethical" to describe mortgage brokers. The thing that I just cannot wrap my brain around is how banks are shedding so much of the responsibility. What I mean is that I get bombarded by account executives all the time who are trying to push the latest and greatest "option ARM's" and other junk products.

The flip side of the coin; the reason for offering those products in the first place is because investment firms and investors in general had an appetite for those pools of mortgage backed securities that were being sold on Wallstreet like politicians have an appetite for hookers on Main st.

Banks and wholesale lenders knew that they could sell the pools of subprime mortgage backed securities so they originated subprime mortgages based on the demand. They sent their fleets of AE's out to all the brokers they could think, they dressed up their ugly products into nice looking alternatives, and they pressured us brokers to produce as much junk for them as we could.

When it was all said and done and the crap hit the fan the government stepped in and helped the banks and wholesale lenders shed the responsibility by blaming brokers for originating the business. I have been around the block and I know that there are some unethical brokers out there. I know that there are some people in the business who even if the loan is a bad idea for the unwitting consumer they will try to get them to "take the deal" anyway so that they get a paycheck... I saw a lot of that the first time I ever entered into a mortgage shop and took my first position as a "loan officer". I would like to point out however that if the demand was not there and the banks did not push these products onto us that the dirty mortgage shops and brokerage firms would've never opened their doors for business.

Now that the smoke has cleared and the debate is beginning to settle down the government is stepping in to protect, help shed responsibility (blame game), and bailout the major investment firms that kicked this catastrophe off in the first place. Initially there was a whole lot of talk about "helping" the struggling homeowner; freezing interest rates on ARM's. If you actually read some of the fine print in the "Hope Now" proposition you will see that it helps a vary small percentage of people who are in ARM's and the majority of those people that it helps are not struggling with their mortgage payments.

Then comes the big guns! and the FED comes out swinging wildly, slashing rates that only help out the big banks, and bailing out lenders who are largely responsible for the "subprime meltdown". The government seems to have all but forgotten about John Doe who is about to lose his home while they protect the people responsible.

The truth is rarely easy to swallow as is the case here. Now I want to point out that despite everything that you may hear or read that not all brokers are bad. The example that I am going to use here is the company that I work for. We are a very small firm and while I do business across the state of NY, we really cater to the local real estate scene. We are a 3 to 5 man operation and it is against our policy to try to goat someone into a loan that will ultimately hurt them. I am giving you that information so that this next piece makes sense. In the last 4 years this company has closed around 475 loans. We just heard from the banking department yesterday and we are waiting for our grade to come in; however they gave us the numbers.

Out of those 475 mortgages originated in 4 years there is 1 that defaulted and 2 more that are at risk of default due to late payment. I do not know what our grade will be, but I would say that is pretty good performance especially when you look at what everyone else has been originating in the past 4 years.

Those numbers definitely prove something! They prove that all of the propaganda that large financial institutions and our government are using to "cut out competition" is simply false. The appetite for those riskier investments is gone and as a byproduct brokers who were thriving on them are gone. The market or "free trade" as we call it (rather falsely now-a-days) was structured in such a way that a balance is struck. Once the equilibrium is knocked off center the market corrects itself and different types of business's rise to the top while others fall.

Bad brokers are out because they cannot survive in this market climate. Lenders are making up reasons to Pare Lending in order to maintain cash reserves. I believe however that one of the best solutions to this crisis is to assign mortgage brokers a grade (already being done) and then allow them or deny them the right to do business based on past performance. That will surely shut out unscrupulous brokers and a big part of the problem will be solved.

Christopher Ohlsen

37 Boynton Ave

(845) 243-5293 (Office)

(518) 565-0799 (Cell)

www.plattsburghmortgage.net

chris.ohlsen@guaranteedrate.com

 

 

Comment balloon 9 commentsChristopher Ohlsen • March 26 2008 10:07AM

Comments

I don't know how they convert numbers into a performance grade, but 472 out of 476 is 99% to me. Well done.
Posted by Rosario Lewis, GRI, SRES - DDR Realty - Orange County, NY (DDR Realty) over 9 years ago
Those are great numbers.  I am a little tired of the finger pointing myself.  It's funny they never have anyone from a bank or lending institution on any of those shows?
Posted by D. Bass, Blog: Ask The Underwriter (Ask The Underwriter) over 9 years ago

Hey Chris - Congratulations on those numbers.  I can't see how your company's grade could be anything but outstanding.  I, too, am tired of being stereotyped and painted with a broad stroke as some evil-doer who ruined the economy.  I am a hard-working person with a wife and two small children.  My father, brother-in-law, and best friend all work for my company.  Right now, we are suffering for the misdeeds of others, which as a businessperson is a risk that I suppose one is expected to take.  But for how long?  We need to spread the word about good brokers like yourself to turn this thing around.  Best of luck.

Posted by Steven Odierno, NJ Mortgage & Marketing Professional over 9 years ago

Rosario - Thank you; yeah I think that we will be rated as an A broker if they assign letters. I think that we will be in excellent standing no matter what kind of rating system they settle on.

D.Bass - The finger pointing has gotten old. I just don't understand the mentality of those in charge who are making the decision to bail out major investment firms who pushed these products and mis-lead the public into believing that they are somehow safe... We've all heard the commercials on the radio from various big name lenders boasting their wonderful loan product that "allows you to pick your own payment" giving you the option to pay less than the monthly interest being accrued and various other risky loan programs... The brokers are not the people putting those enticing commercials on the air. We field calls all the time from borrowers wanting those products and while I will offer advice and recommend against a product... If I don't give it to them someone else will. I may try to steer my client but if I do I am trying to steer in a safer direction by explaining how these advertised programs actually work.

Steven - I also have 2 small children.. they can definitely be a handful:)... Of course they are a ton of fun and my children are very well behaved (anyone who has ever watched them will tell you so:). I have been married for 6 years... I am a grown up and I think it is only right to treat people the way that I would like to be treated. There are some "loan officers" out there that give us a bad name because all they care about is getting that paycheck so that they can go buy a new car and show off to the ladies downtown; but as responsible adults and mortgage professionals it is our job to spread the word and to differentiate ourselves from the masses... Now the market is helping us a bit with that as all the real dirty subprime guys do not have a place in the mortgage industry anymore and are filing for unemployment or lining up for jobs are used car lots. Spread the word "not all brokers are bad"... and best of luck to you too!

Posted by Christopher Ohlsen (Credit Werx, LLC.) over 9 years ago

Chris - I think you have a great point there - we should take a look at what we've accomplished and how our production has done.  I feel confident in mine, and yours looks extremely respectable.

Dan

Posted by Dan Hartman (Province Mortgage Associates - NMLS #2861) over 9 years ago
Dan - Absolutely, there is no way for people to just blindly blame "brokers" for the financial crisis that this nation is in the midst of if each broker doing business is accountable for his/her actions and level of loan performance after origination. If I have a very slim to none default rate my loans are obviously performing and therefore I am not the root of evil that is sapping the life from a healty economy but rather an honest broker.... Yes We Do Exist!!! Thanks for the comment.
Posted by Christopher Ohlsen (Credit Werx, LLC.) over 9 years ago

Hi Chris: Congratulations! My feeling is if you're operating your business the right way in the first place, there is no issue. Those who chose to operate their business in their own self-interest are gone.

 

Paul

Posted by Paul McFadden, Pest Control, Seattle, WA. (Paratex) over 9 years ago
Congratulations Chris--Keep up the good work.  Those numbers do not surprise me as i could tell from the moment that we had started doing business together that you are one of the good guys.  ---
Posted by Larry Ellis (L Ellis Appraisals) over 9 years ago

Paul - Thats right, they are gone. That is why I take issue with everything going on right now in government. It's not just that the government is blaming individuals and firms that truly are not responsible for this mess, but at the same time they are bailing out the firms on wallstreet that are responsible. The only reason that Bear Sterns was so heavily exposed to the subprime mess is because not only did their firm buy many of those risky pools of mortgages, but they also purchased Encore Credit Corp. during the hieght of the subprime refi-boom (no longer in biz) who originated exclusively subprime mortgages. The government seems to be speaking out of both sides of it's mouth.

Larry - Thank you, I appreciate you saying so! It is true that my number 1 priority is coming through for my clients. You are one of the good guys too Larry. I almost had one for you the other day in "Croton-On-The-Hudson". It was fallout from BofA; I wasn't sure if the original appraiser would release the appraisal to me or not. I prepped the guy to go through you just in case, but that appraiser ended up releasing it to me. Now that Zillow has such a great set up I will be targeting down state more often since I have a phenominal appraiser down there:)!

Posted by Christopher Ohlsen (Credit Werx, LLC.) over 9 years ago

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