I can’t find anyone who will stage just one vacant room. The rest of the house is fine, but the master bedroom is empty.

If anyone knows a stager who will stage a master bedroom in Kirkland/Bellevue, can you please have them give me a call at 206-910-1000 ASAP?

Thank you!

Besides the fact that we will most likely be heading into 2004 price levels shortly, we are also switching mls vendors.

For the general public, switching mls vendors may not be noticeable at all, but for me it is “The End of the World…as I know it.” because I will no longer have access to hand calculating statistics for King County or any large area like Zip Code.

The New Matrix system will work on any browser, so I can carry the mls around on an iPad…I’m happy about that. But I will have to devise an entirely different method of conveying market strength and weakness using the new system in smaller quantity analysis.

Maybe not the end of the world…but clearly the end of the world as I know it.

So here we go again.  Now that mortgage rates are headed up, the deceptive lead generation ads are crawling back onto the web.  Here’s a great example from a Google ad:

FHA Refinance 4.0% Fixed
$160,000 FHA mortgage for $633/mo.
No SSN req.
Calculate payments now!
MortgageRefinance.LendGo.com

When clicking through, the lendgo.com lead generation site asks some simple questions like the value of my home, zip code, whether or not I’ve ever filed bankruptcy, etc.  Then I’m asked to provide personal information and assured that I’m dealing with a secure website.  Name address, phone number, etc.  After I click “submit,” I’m told that I will be given four quotes. I clicked ‘submit’ after offering them the following:
First Name: Your Ad
Last Name: Violates TILA
But I don’t get a quote. Instead I’m asked even more questions before being told that four lenders will contact me within 24 hours:  Quicken Loans, Onyx Mortgage, Americash Mortgage Bankers (I’m thinking it was a seven beer night when someone decided on that name), and….I’m totally surprised here:  Paramount Equity Mortgage.

So, Quicken, Onyx, Americash, and PEM, Are you aware that the lead generation company you’re using is violating the Truth in Lending Act and probably a handful of state laws by advertising a note rate without conspicuously including APR in that ad? 

I bet someone at these mortgage companies assumed that no one would be able to trace the deceptive ad back to them.  Nah, their chief compliance officer couldn’t be that stupid. Oh wait, maybe they don’t have a chief compliance officer. Or perhaps these big mortgage companies are just making a strategic business decision: Violate TILA and some state laws and if we get caught, we’ll just pay the fine and move on because we’ll be able to earn six times the amount of the fine anyways. 

Regulators:  You’re being tossed under the bus in Washington D.C. this week as banker after banker stands before various congressional committees telling the world that the bank regulators were asleep at the wheel. I’m not going to throw you under the bus. Why? Because there never will be enough money to regulate every single mortgage lending transaction across your area of authority.  You’ve got limited resources and regulators are always trying to balance everyone’s needs and are constantly being pulled in 10 different directions at once. 

So I’d like to give the regulators a helping hand.

If mortgage companies are buying leads from a firm that’s using deceptive advertising, you can write out 5 consent orders and be very efficient with your time.  Just start clicking on all the banner ads!  It will be easy and mildly entertaining for your staff! At the same time, you’ll help consumers avoid getting sucked into doing business with a company that has chosen a business model of attracting consumers who are an easy mark. 

They fell for the click through ad. They believed there was a 30 year fixed rate mortgage available under 4 percent!  If they were stupid enough to fall for this, then that means perhaps the mortgage company can also win all kinds of other shell games with these folks, who probably believe there’s a diet pill that will help them lose those last 10 pounds and that the secret to prosperity and abundance is to think thoughtful thoughts.  

Wait! Maybe that’s the secret to the housing market recovery: We can just use the power of abundant thinking to “think” away all those short sale, REOs, and re-defaulting loan mods! If anyone’s going to try this, let me know and I’ll calendar ahead to check back with you in 2014.

Here’s another google ad:
3.44% APR – Refinance Now
$200,000 Mortgage for $898/Month!
As Featured on CNNMoney & Forbes.
DeltaPrimeRefinance.com

Oh my goodness! This lead generation firm actually quoted APR! Which would be a cause for celebration, until you click through and see that they’re quoting a 5/1 ARM loan, and then they also inform us that this might be a 15 year amortization.  Of course the APR looks awesome. Regulators, it would be interesting to find out exactly how many people, after filling out the online lead generation form, decided to select a traditional 30 year fixed rate loan instead of an ARM loan or a 15 year amortization.  Classic bait and switch.  Like shooting fish in a barrel.

These lead generation companies appear to hold a mortgage broker or lender licenses in various states, yet the consumer information is sold to other licensed brokers or lenders.

Question: Are mortgage brokers, lenders and banks responsible for making sure the leads they purchased are generated by advertisements that do not violate state and federal law?  If the answer is no, then deceptive mortgage lending advertising will continue to grow as long as brokers, lenders and banks are able to skirt law by purchasing these leads.

To the loan originators who regularily purchase these leads: we need to send you to Tiger’s rehab center and wean you off the crack.  Deceptive ads are poison to the system and they make it harder for you to procure clients using advertising methods that are transparent, ethical, and legal.

Maybe the broker/lender/banker willl say “We sign a contract and it’s the lead gen company’s responsibility to make sure the leads are generated according to state and federal law.”  If I was a regulator (and sometimes I like to put on a dark blue suit and high heels and pretend I’m a regulator in the privacy of my own home) I might say, in response, “So what method do you use to be certain that the lead gen companies you deal with are advertising according to state and federal law?” 

Quicken Loans, Onyx Mortgage, Americash Mortgage Bankers and Paramount Equity Mortgage, all a rational, thinking consumer has to do is google or bing your company name with the word “complaints” in the search box like I just did and they’d have all the info they need.  But the rational, thinking consumer is not your target market.

Yesterday I tuned in to CSPAN to watch Washington Mutual execs answer to the Senate Homeland Security and Governmental Affairs subcommittee about the failure of Washington Mutual.    There are several things I found interesting…former CEO Killinger’s whining about WaMU’s unfair treatment of the banks dissolve and lack of taking any accountability as the leader of the bank for the past 18 years is not one of them.   The testimony is very timely as our Congress is looking at financial reform, I hope they pay attention to what is being revealed.

Here are some points I find interesting:

From the Associated Press:

WaMu’s pay system rewarded loan officers for the volume of loans they closed on. Extra bonuses even went to loan officers who overcharged borrowers on their loans or levied stiff penalties for prepayment, according to the report of the Senate panel’s investigation.

“Washington Mutual engaged in lending practices that created a mortgage time bomb,” Levin said. “Because volume and speed were king, loan quality fell by the wayside.” …

In some cases, sales associates in WaMu offices in California fabricated loan documents, cutting and pasting false names on borrowers’ bank statements, the panel found. The company’s own probe in 2005, three years before the bank collapsed, found that two top producing offices – in Downey and Montebello, Calif. – had levels of fraud exceeding 58 percent and 83 percent of the loans. Employees violated the bank’s policies on verifying borrowers’ qualifications and reviewing loans…”

Currently the Federal Reserve is looking at changing how mortgage originators are compensated.   They do not want compensation to be based in any part of the terms of the loan (such as the loan amount).    This has caused some banks to change to a reward system based on volume (as Washington Mutual did) instead of the merits of each individual loan.  

From Senator Levin’s opening statement:

“Washington Mutual and Long Beach compensated their loan officers and processors for loan volume and speed over loan quality. Loan officers were also paid more for overcharging borrowers – obtaining higher interest rates or more points than called for in the loan pricing set out in the bank’s rate sheets – and were paid more for including stiff prepayment penalties…”

The difference between mortgage bankers and mortgage brokers compensation is that mortgage brokers are the only one’s who are required to disclose how they’re compensated on the “back end” (yield spread premium).  

James Vanasek, former Chief Credit Officer and Chief Risk Officer seemed relieved to have a chance to tell the subcommittee how his attempts to right Washington Mutual were ignored from management.   From his submitted testimony, he feels that Washington Mutuals tagline sent the wrong message to their mortgage originators: the “Power of Yes” absolutely needed to be balanced with “The Wisdom of No.”

“Because of the compensation systems rewarding volume vs quality and the independent structure of the loan originators, I am confident that at times borrowers were coached to fill out applications with overstated incomes or net worth adjusted to meet the minimum underwriting policy requirements. Catching this kind of fraud was difficult at best and required the support of line management. Not surprisingly, Loan originators constantly threatened to quit and go to Countrywide or elsewhere if their loan applications were not approved.”

Washington Mutual was one of the pioneers of the option ARM, offering this product as far back as the 80s (per Killinger’s submitted testimony)   I remember back in the 90’s participating with a Washington Mutual loan originator who was presenting the product to a group of investors.   This use of this product made more sense than how they (and many others) wound up pushing it.   

Our company actually banned this product and I know we lost business by not providing option ARMs if we could not convince the borrower to use a more fixed loan.  Account executives from every bank who had an option ARM would be sure to let us mortgage originators know just how much income we were losing.   I was (and am) okay with that.

From Senator Levin’s opening statement:

“WaMu was eager to steer borrowers to Option ARMs. Because of the gain from their sale, the loans were profitable for the bank, and because of the compensation incentives, they were profitable for mortgage brokers and loan officers. In 2003, WaMu held focus groups with borrowers, loan officers, and mortgage brokers to determine how to push the product. A 2003 report summarizing the focus group research stated: “Few participants fully understood the Option ARM. … Participants generally chose an Option ARM because it was recommended to them by their Loan Consultant….

To increase Option ARM sales, WaMu increased the compensation paid to employees and outside mortgage brokers for the loans, and allowed borrowers to qualify for the loan [based on a minimum payment]…”

From the LA Times:

Adding to the problems, WaMu and Long Beach Mortgage frequently steered borrowers who qualified for prime loans into subprime loans, the subcommittee found.

This post is all ready too long to discuss Long Beach Mortgage…but I can’t help but share this point I’ve tried making several times about what happened time and time again with Account Executives from banks (not just WaMu) who called on mortgage brokers to push the bank product (from Huffington Post):

“Within Long Beach Mortgage, former employees described how some sales people taught brokers how to break the rules, including using fake and forged documents.”

I’m glad to say I never sent a loan to Long Beach Mortgage and somehow I managed to only send one loan to Washington Mutual (which was an interesting story in its own).

And I would like to say that consumers can feel better about selecting a mortgage originator today, thanks to the SAFE Act, however mortgage originators who work for a depository bank (such as Washington Mutual) are not required to be licensed, they’re only required to be registered (you can thank Congress for that).