Is it possible we are at the bottom?

***Updated/Revised 4:30pm 02/08/2009 PST:  Here is the link to the “Memorandum” (.pdf document) showing how this mortgage broker, in his own words, fraudulently originated millions in loans and how the fallout will plague our economy.  Big thanks goes to blogger “Scotsman” for the getting the document to me.


This is how is it possible………..we may not be at the bottom.

Ardell, I share your hope.   My hope for change is that real estate and lending industry comes to grips with how out of control the core players were that led us to the crisis we are in.   If we all point incriminating fingers to other people in our industry from escrow people to mortgage brokers to agents to Wall Street, pretty soon there’s nobody else to point to.  It circles back to all the players who participated.  Too simple of an explanation of a complex problem?  Maybe.  But, it’s fix has got to start with people in the trenches who are transacting the sales and arranging the financing.

But my hope and Country fight an uphill battle because of people such as Christopher Warren, the mortgage fraudster who wrote the above missive, “how is it possible”. Christopher Warren skipped out of the country on a private plane this past Monday.

See his incredibly clear picture of what is facing our markets by his “memorandum.” (.pdf document).

If one man’s expose of what went on in lending by one person does not make you pale, then I don’t know what will.

An excerpt from Christopher Warren’s  “how it is possible:”

56 thoughts on “Is it possible we are at the bottom?

  1. Interesting that you would post this here.

    All mortgages were fraud based on over inflated pricing. These Loan Originators are the fall guys who were given marching orders to create paper. The more inflated the better.

    These mortgages were used to transfer consumer debt, credit cards, boat, and auto loans into Notes and Deeds of Trust. It’s easier to sell deeds, than flakey consumer debt, no matter how high the interest.

    But you posted this here. Why?

  2. It’s a blog, David.

    Tim had something to get off his chest. Why shouldn’t he feel free to post whatever he wants to post, here?

    I still think lots of people don’t understand what blogging is.

  3. I read Warren’s “memo” several days ago. It’s interesting to hear that he’s now skipped the country. Probably a good idea, although the damage he and those like him have done to the world’s financial markets leaves very few, if any places for him to feel safe.

    There are two important points here. The first is, as he says, that there are very, very few people who really understand how the markets and various financial instruments created and traded as a result of the manipulations of the secondary markets work. If few understand how they work, policing and enforcing them is going to be very difficult. Those “in the know” are, and always will be, able to out-smart and out-maneuver those who write the laws and enforce them. Without a surrounding culture dominated by ethical considerations, essentially self limiting and policing, there’s little hope for true reform.

    The second point is that it wasn’t just the MBS/CDO tranched products that led us to where we are today, but all of the derivative products they spawned. Trillions of dollars of unsecured mirror-image products were created out of thin air, but with real consequences should a serial default be initiated. It is these derivative products that are slowing bringing the international banking system to its knees. Given these factors, I don’t see how it ends except through total collapse under its own weight. Reset.

  4. Tim,

    I feel your pain. I remember when you refused to close a transaction because of shady dealings, and the agents about black-balled you for doing so. “Why can’t you get this done, when others CAN!?” were the pressures of the time, for lenders and escrow companies, with agents just wanting things to close.

    “Follow the money” most often does not lead to the people with the highest standards. Yet people choosing professionals who are most succesful as to money made, is often what happens. That’s why I was upset when sampai said he used the agent that at first meeting, lied to him. Rewarding liars by giving them your business…feeds the underbelly, and puts the ethical out of business.

    You don’t go far enough when you say: “Only insiders who know how to play the ‘game’ can fight the fraud…” The buck doesn’t stop there…it goes all the way to the consumer who is gaming the system and thinking that’s OK.

    Bloomberg’s post on the $15,000 credit anticipates that some will be selling their homes to their family members and straw buyers in “pretend” sales, to grab the $15,000 credit. Gaming the system is not over.

    That is why I do not support gaming Google with SEO tactics…gaming is gaming. “vote for me” in the shorty awards, or “digg me” or any measures of “gaming” vs. getting to the top of the search engines in an honest manner…are all forms of fraudulent activity.

    I boil it down to “everyone wants to win” and they are looking for any means to win. “May the best man win” has become “old school”.

  5. Yikes. Sorry about the link problem. It could very well be that the site was taken down for a variety of reasons. Maybe somebody with more tech savvy skills that I can get the pdf. memo off the internet (isn’t is saved somehow by Google?)

    My post was really inspired by Ardell’s post about a real estate bottom. I pretty much thought about it for quite a while and during some free time of surfing the internet I came across the Christopher Warren story and his “memorandum.” It became clear to me that he is one of many that has effectively destroyed the stable markets we hope to work in. And for that reason it becomes more and more clear how much more work it will take to recover from this crisis. We just started seeing large layoff numbers in Washington State and Weyerhaeuser announced yesterday dismal earnings (losses) with projections that closed sale transactions may be less this 1st qtr 09′ than last qtr 08′. Not promising. And that is without taking into consideration the global social-economic problems.

  6. It’s just that two of the main posters promote the mortgage industry. I am very happy to see the post no matter where it is.

    There was a lot of hype about interest rates, the payment you can afford, and, cheap money. Exotic loans, best left to seasoned investors, became common place.

    The massive amount of Loan Originators pushed the hype that we all got caught up in.

    In my opinion the lower the payment the higher the price you could afford. It all fed on itself.

    Today, those higher prices are the problem. No matter how good the borrower, or solid the loan is, Real Estate prices are declining.

    Agents sold homes for higher prices so the comps were there. Lower monthly payments made it seem OK that prices were that high.

    President Bush used increased home ownership as an example of how well the economy was doing. The hype just kept coming.

    The problem is that there are basic rules to Real Estate that were ignored. In my opinion it was the increase of unseasoned Loan Originators, and Sales Agents that really got the ball rolling.

    This memo shows that the Broker/Owner knew what he was doing and took the money and ran. That’s where I think the fraud is. The over sight that was supposed to be in place turned a blind eye.

  7. Hey Tim – the links still aren’t going to the correct location… I would love to see what you are referring to , though:) I looked hard at that web design page thinking there was some hidden message I just wasn’t getting – LOL

  8. I’ve sent the file to both Tim and Ardell- with a little luck, they’ll get it and be able to host/post in a more accessible spot.

  9. Scotman,

    Thanks very much. I updated the post with the link on the very top.

    I hope people take a moment to read it.

    Ardell, LMAO re: bottoms.

    My sense is that the average agent out there doing their best to work in an honest manner really had no idea what else was going on in the market place in terms of the financial and lending world. Loan officers knew, title and escrow knew. The lending industry was racing along at breakneck speed beneath the average agents radar. So stories like this, while agents hear about them, they really didn’t have a keen understanding about the impact it would have on their market, IMHO. The amount of money racing along out there in 05, 06 and early 07 still just boggles my mind.

  10. “My sense is that the average agent out there doing their best to work in an honest manner really had no idea…”

    The ones that did, were being fired by their clients for not going with the flow. Remember my post in 2007 about the poor agent who thought maybe she was wrong and everyone else was right?

    When the whole industry is “doing it”, you have to wonder if maybe the rules changed and you are just too “old school”.

  11. Please read the memo again. This is a kid with no experience.

    People with a little more finesse are making millions of dollars working on the “crisis” we have today.

    The system is horribly broken. There is nothing on the table or in the stimulus package to fix the system. We are simply giving the system more cash to play with.

    I think it’s a brave thing to give the memo more exposure.

  12. Tim, thank you again for the memo.

    Yes, I agree that the lending portions, the Financial Markets, and credit concerns were limited in my scope of work to the interest rate, getting a thirty year fixed loan, and appropriate fees, beyond that it was between my client and the lender.

  13. This is a good Kid? Edward, how to you reconcile that? Evidently he sure can close a deal. Unfortunately, those “deals” probably caused significant financial damage to neighbors who’s values were decimated by distressed home sales that have his fingerprints all over them.

    I hope he spends a long time in prison.

  14. He’s just a kid.

    Much more damage has been done by seasoned professionals. This is a very clear picture of the mortgage business.

    We all want to believe “It’s a Wonderful Life'” or that Washington Mutual is a friend of the family.

    On the other hand we want our stock prices to go up. We want to see economic growth with huge profits.

Leave a Reply