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Salesmen without Scruples: My Observations as a Loan Officer -- Part I

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**The following is the first part of a story that was updated Sundays in January. Scroll down for the three previous pieces in the series.


Salesmen without scruples selling loans to people without marbles set off the sub-prime housing collapse.

I was one.
I sold mortgages all over America from a building on 32nd street a block from the Empire State Building during the heady days of deal making when a mortgage company sponsored that year’s Super Bowl.
50 blocks downtown and a world away, Wall Street was betting billions on the sanctity of these salesmen without scruples and the sanity of our customers.To be sure, they made their measurements, calculated their risk, but it was all math with no meaning.They failed because they never set foot in a mortgage brokerage.Unfortunately for me, I did every morning.This is my view from the inside.

The sub-prime market operated in a realm far removed from the picture of a young couple walking into a local bank to meet with a manager.Most sub-prime mor…

Salesmen without Scruples: My Observations as a Loan Officer -- Part II

Sales 101

Whatever the product, a salesman has three objectives.

1. Qualify.
2. Build trust.
3. Close.

The mortgage business perfectly illustrated this truth. A credit check required the borrower’s social security number to determine if they qualified for a loan.

Though it’s hard to find faith in someone over the phone, this part of the process was scripted to sound hyper-professional and short circuit common sense. Basically it boils down to this: if you want something, ask for it.

A good, honest salesman deserves respect. It’s an art that can be mastered, but like pure athleticism or artistic ability it requires innate talent.

Example: Loan officer standing with a phone clutched in his fist like he is about to punch himself with it. The buckle on his Gucci belt matches the clasps on his Gucci loafers. He is talking to an apprehensive customer of mine from Sarasota, Florida named Mike Perez.

— This is Christian, I’m a senior loan officer. Yes, that’s right. Like your religion. Mr. P…

Salesmen without Scruples: My Observations as a Loan Officer -- Part III

Science Vs. Shoeleather: The Case Against Quants

Based on the prevailing financial models in 2006, sub-prime loans defaulted at a six standard deviation shock beyond expected calculations.A natural occurrence of once in 216 million years.I wouldn’t buy a one dollar lottery ticket with those odds.The banks bet billions.
The math couldn’t account for every variable.Why didn’t the big investment banks have detectives on the case?Everything was reduced to an excel spreadsheet; billions were bet on blind calculations.A little gumshoe work would have put a question mark next to the math, especially when they discovered that smooth-talking ex-cons were providing the numbers and earning the commissions.
Sometimes it was only a simple stroke of white-out that stood in the way of a loan’s approval and the commission that came with it.
At Global Home Loans, a $10,000 commission of Danny’s appeared in jeopardy.The loan required the borrower to have a bank balance showing sufficient cash reserves.But,…

Salesmen without Scruples: My Observations as a Loan Officer -- Part IV

The Closing

Of the eight people I started with at the second brokerage, First American Financial, none lasted more than two months, myself included.I soon found a stable job that while it didn’t promise $20,000 a month, lasted longer than most of the mortgages closed during my tenure.
Both brokerages I worked for were sued by its employees in class-action suits alleging that loan officers should have been classified as “non-exempt employees” and paid overtime.I opted out of both lawsuits.I dropped out of the case against Global Home Loans when a 10-page questionnaire, an obvious stalling tactic, was issued.It worked.The time expenditure became too great for a suit with little promise of payout.The companies suffered the same fate as most of the loans it closed.They went bust.

I didn’t keep in contact with anyone from the business.I quickly lost touch with Tara, Ed left First American soon after I did; he called a few months later to let me know he had found a job as a bank assistant.I fo…