Salesmen without Scruples: My Observations as a Loan Officer -- Part I
Salesmen without scruples selling loans to people without marbles set off the sub-prime housing collapse.
I was one.
In 2005, 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 the 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 mortgages originated from brokerages where guys with bad accents cold called from cubicle farms to customers all over America.
I found the first mortgage company I worked for, Global Home Loans and Finance, through The New York Times classifieds. The headline: EARN $20,000 A MONTH.
I called the number; spoke with a guy named Danny, and scheduled an interview. He did not ask to see my resume. My first of many red flags.
The next day, I interviewed with Danny, a 20-something guy from Great Neck who looked like a young Barry Manilow if he were a shyster instead of a songster.
He introduced me to the owner in passing. I noticed one thing. The face of his watch was the size of a hockey puck. Probably filled with air, just like the promises of earning $20,000 a month.
But, greed got to me. I wanted to make money, set my own hours, and have time to work on the novel I was writing. Thankfully I was 25 and young enough to recover from my stupidity.
The mortgage industry operates on commission. I received no salary or benefits and I never made much. I was renting an apartment on Avenue C next door to a squat and above a bar called the C-Note. The night before my first day, the band played until 2 a.m. on a Sunday night. I stumbled downstairs in my sweatpants and told them to get off the stage. When more people stand on stage than in the audience, there’s an unwritten rule: pack it up.
I arrived exhausted for my first day of work the next morning. Within my first hour on the job I was offering financial advice over the telephone. I had no experience in mortgages or sales.
The industry was lightly regulated, both the products sold and the people selling them. In most states, mortgage brokers needed to be licensed. However, the broker served merely as a figurehead to satisfy state regulations. The companies I worked for were licensed in over a dozen states. Most brokerages though operated as absentee landlords, they just collected the money. The footwork was done by loan officers, people like me who hit the phones an hour off the street.
I soon learned many of my co-workers had convictions, and they weren’t the religious sort.
Danny’s crew consisted of seven people. The standouts: Dave, a holdover from the old Hell’s Kitchen; a small mousy Italian guy with thin dark hair that draped over his little head. He was once involved in drugs and restaurants, running both. Angel, an ex-con that draped his cheap pea coat over his shoulders like he was an associate in some Inwood mafia. Tyrone, a Black guy with a coke spoon pinky nail who perused hard core porn during his down time.
I sat with my back to him, facing Tara, a party girl with a perma-rasp that sounded like she spent the previous night belting out Bon Jovi tunes at a Karaoke bar.
For her college graduation gift her father funded her DD implants, consolation for divorcing her mother and remarrying a Playmate. For her graduate school graduation, they were removed. She was back to an A-flat when I met her.
Tara was seeing a human resources director at a rival mortgage brokerage downtown that I transferred to a few weeks later. She interviewed with him, didn’t get the job, but started dating instead.
I became Tara’s friend, without those kinds of benefits. But I did appreciate her feminine levity and chance to commiserate.
I did well enough on an early lead to make Tara jealous. I’m good with people and talkative, but not a salesman for stuff I don’t believe in.
My office found leads through a third-party that blanketed the internet with banner ads promising rates like a limbo line—look how low we can go. Those who signed-up saw their information sold to brokerages all over the country. A seasoned loan officer would call with every intention to close a loan; thereafter these numbers were cold-called in perpetuity to train new classes of recruits.
Nearly all the loans we closed were refinanced mortgages, homeowners who wanted to lower their interest rate and monthly mortgage payment on their existing mortgage. Refi’s were more abundant and less demanding than new home mortgages and thus perfect fodder for the armies of salesmen that sprung up overnight.
As an experiment I clicked on one of these ads and signed up posing as a prospective borrower. I received my first phone call within 15 minutes. The calls continued a year later. They finally stopped when the brokers went of out business.
*Some names have been changed.
**And crypto commercials owned the airtime during the February 2022 Super Bowl. Here's Larry David shilling for FTX. Pro tip: Bet against financial instruments advertised during the Super Bowl. "Be fearful when others are greedy, and greedy when others are fearful, be greedy." –Warren Buffet
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