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Special
Insider's Report! |
Loan Officers do not always earn
six-figure salaries ethically
By
William John McCloskey, president,
WJM 7 Commercial Lending, LLC.
To view documentation about Bill's
experience, please click
here.
Updated! William
is pushing forward to help effectuate change in the mortgage
industry! Having recently testified before the Pennsylvania
House Commerce Committee, William continues to bring forth this
information. See articles:
Scotsman
Guide (1/2007) and
ITBusiness
Edge (6/2007).
I became a
loan officer at a national lender in late 2002 after completing the
company’s training program. The training not only taught me to sell
a loan, it taught me mortgage basics. Since that time, I have been
exposed to some of the shady dealings described on this website.
In the
mortgage business, some scrupulous mortgage brokers and loan
officers earn the coveted six-figure income that we all hear about.
Unfortunately, some very unscrupulous lenders do as well.
I have done
sales for over seven years, and I have heard all of the
pie-in-the-sky figures extended to me about potential commission in
various job interviews. That said, I was promised a six-figure
income at two mortgage companies that fall into the unscrupulous
category. Once I hit the sales floor at these two
companies, I realized that the only way to attain that type of
income was to manipulate my customers, and at times, commit fraud.
I did not
do either of the above and I decided to take a stand.
My stand against
predatory lending
I speak
from experience about unscrupulous lenders. I was fired
from a non-publicly traded national mortgage lender in early 2005
after reporting fraud to government agencies. The fraud that I
witnessed included:
-
Blatant kickbacks to
appraisers
-
Forgery of documents
during the origination, processing and underwriting
-
Upselling of loans
with exorbitant origination fees
-
Whisking customers to
closing table as quickly as possible for one-day & three-day
closings
Subsequent
to my termination, I filed a complaint with OSHA and the Department
of Labor under the whistle-blower provision of Sarbanes-Oxley and I
won a judgment before an administrative law judge - in spite of the
fact that my former company was not publicly traded. I am currently
appealing my award for damages. To view documentation in
support, please click here.
How did I win a
judgment if my former company was not publicly traded?
Answer:
Because the company sold the majority of their loans on the
secondary market and bundled them as mortgage-backed securities. The
company was also an issuer of asset-backed securities.
The company was held to
accountable to Sarbanes-Oxley because companies that issue
asset-backed securities have a reporting obligation under either
Section 13(a) or 15 (d) of the Securities and Exchange Act of 1934,
at least for a period of time.
My
continued exposure to predatory lending (documented in the PDF)
The
documentation in the PDF is from my complaint about a national
lender to the Pennsylvania Attorney General – subsequent to my
termination from the company that I blew the whistle on.
After being
subjected to the incredible shenanigans at my former company, I did
not want to be associated with another company that did anything
remotely shady or fraudulent. Unfortunately, I did not foresee that
I was about to be exposed to similar shenanigans at another national
lender.
After my
termination, I worked for a legitimate mortgage banker in Marlton,
NJ. It was a good company, but it was experiencing growing pains.
Because of this, I forwarded my resume to several national lenders,
and I was eventually hired at a national lender that was a division
of a huge publicly traded company.
In my
interview with this company, I was told that I would be originating
sub-prime loans. After about two weeks on the sales floor, I
realized that a large percentage of my customers fell into the Alt-A
range. However, the company priced their loans with a proprietary
pricing module, which was a rate-sheet driven tool consisting of
about eight to ten sub-prime lenders. Hence, the company priced all
of their loans as if the customer fell into the sub-prime category
because they did not have an Alt-A pricing module.
The only
way that I could have kept my job at this company was to price my
loans with three or four points and a five-year prepayment penalty;
or place customers, some with a middle credit score above 540, into
a 2/28 ARM with a three-year prepayment penalty.
At
one point, I was attempting to price a refinance loan for a customer
with a middle credit score around 640, a low debt-to-income ratio
and a 90 LTV. The customer did not have any late payments on his
mortgage, so I attempted to put him into a 30-year fixed. I asked a
senior loan officer for advice. His exact words were: “You don’t
want to put this guy into a 30-year fixed, if you want to get a
customer a great deal, then go work for a bank. If you want to make
money here, you are going to have to sell people on a 2/28 ARM with
a 3-year pre-payment penalty”. This particular loan officer had
awards for “good salesmanship” on his desk. I was appalled by this
because a 2/28 ARM is strictly reserved for a customer with a credit
score below 540 and on the verge of bankruptcy – and without a 3
year pre-pay; which defeats the purpose of the loan (this is
described in the PDF copy of my documentation).
Because
this company was essentially upselling the majority of its
customers, I abruptly resigned after a four-week tenure. Subsequent
to my resignation, I filed a complaint with the State Attorney
General and the Department of Banking. I did not register a
whistle-blower complaint with OSHA and the Department of Labor under
section 806 of Sarbanes-Oxley because I resigned and because I was
already involved in a major SOX case against my former employer.
I did,
however, inform both government agencies that my former company was
violating Section 404 of Sarbanes-Oxley. Because securities fraud
was out of the Attorney General’s jurisdiction, my complaint was
forwarded to the S.E.C.
My financial
hardship is worth it
I have
suffered financially because of my stand against my two former
companies. While loan officers at these two companies
“earned” six-figure
salaries, I made less than twenty five thousand dollars in 2005. So
far in 2006, I have not done any better financially. This is due to
being temporarily displaced from the industry while I am setting up
my own residential mortgage business and a commercial lending
business.
I do not regret my course
of action
because I have gotten a great education, albeit a painful one, about
predatory lending. I can now use this education to quickly identify
fraud and predatory lending and steer my customers in the right
direction – in both the commercial and residential realm. I will
sleep easier at night knowing that I can
earn an honest living for
myself and pursue the American dream ethically.
Furthermore, by educating myself about Sarbanes-Oxley, I can help
honest loan officers take a similar stand against unscrupulous
lenders. The consequences of blowing the whistle can be dramatic,
and the psychological damage is a result of the realization that one
might not be hired to work in the same industry. After all, even
companies on the up and up might perceive a former whistleblower as
being recalcitrant. I am a young single man without children, and I
could not imagine dealing with these extenuating circumstances if I
were married and were the major breadwinner for a family.
Moreover,
by citing Sarbanes-Oxley as a regulatory tool to combat mortgage
fraud, I am doing my part to clean up an industry full of charlatans
doing business at boiler-room operations. That may sound harsh, but
it is an unfortunate reality. Our nation’s economy depends on our
housing market and on our securities markets, and as I have
documented, both are intertwined.
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