Whenever I’ve gone to work somewhere new, I’ve always done so thinking that I was joining a fine establishment. It’s a solid company, thought of well in the community in which they do business, stockpiled with A Team players. That sort of thing. It’s a natural expectation. After all, the company I work for, and hence the company I keep, can be seen as a direct reflection of me, as well as my value to others and my self-worth.
It’s not much to ask that the people I worked for and with be honest, well-intended people. And while I know I do stupid things for the wrong reasons from time to time, there is almost always a point at which I am able to reflect on my actions and be honest about what I did and why I did them. It’s part of what keeps me from knowing I’m not a complete jerk (at least not all of the time).
One of the guys I worked with at my chop shop was by all outward appearances a good man. Let’s call him Wayne. That’s actually his real name, but I’m pretty sure he’s in prison now, so he probably won’t be reading this for the next 5-7 years.
Wayne was not only a fellow mortgage broker, but he was also a husband, father of two little girls, and a minister with the Jehovah’s Witness outfit on the south side of Chicago. For some reason, I had blindly assumed that all Jehovah’s Witnesses were pencil-necked, bike-riding white boys from the suburbs. He was black (can I say that?), nearly six and one-half feet tall, thick and wide, and wore suits purchased on layaway that were made with thread so bright you’d think you were on magic mushrooms when he’d walk into the room.
By my third week at the chop shop, my dreams of working for a class organization had pretty much flown out the window. I was one of eight people (out of maybe 30) that had gone to any sort of university, and I had never been previously employed by either Jiffy Lube or The Dress Barn. I was no doubt playing on the B Team. Or D. But then there was Wayne. He wore pocket squares, and he spoke as eloquently as any man I had ever met. I liked him. We talked a lot, mostly about his ministry. He was a passionate orator. He could go on for hours, and often did, about the coming apocalypse and how establishing the “Lord’s kingdom” on earth was the only way to save us all. It’s the Jehovah’s Witness mantra. A bit far out for me, but he was a man deeply rooted in his beliefs and I respected him immensely for that.
One day in that third week, as we sat in his office with the door closed, in the midst of a conversation about his weekend door-to-door evangelism, he asked me a question that, at first, I didn’t quite get. He said, “You’re Jewish, right?” I confirmed, and he continued: “So…are you a big guy?”
“I’m five feet and seven and a half inches tall,” I said. “I’m obviously not a big guy.”
He shook his head, stretched his neck so that he could see over the desk, and pointed his wide brown eyes at my waist. It became clear that he hadn’t been talking about my height, and it quickly became a weird conversation that eventually led to his next question: “Would you ever consider doing porn?”
He offered me $25,000 to do a “scene” in his movie. I know that may sound unbelievable. The going rate for Jews is probably much less. But to any doubters, I can only offer you my word that this is completely true. When I promptly turned him down, he said, “Is it because you’re married?”
What he didn’t seem to understand was that while being married no doubt played a role in my decision, the bigger issue was that I’m just not the sort of guy who bangs strangers for cash. At least not on film. And I couldn’t believe that the Jehovah man himself—the door-to-door evangelist of 75th Street—was a producer of pornography. The selfish part of me was bitterly disappointed that I took a job that was also available to pornographers. I also felt somewhat betrayed. Porn production was a big thing to leave off your resume when applying for new friends. I felt as though I’d been lied to. But even after I got over all of that, I just couldn’t fathom why this guy would want to do that sort of work, and he sensed my confusion.
He asked, “Why do you come to this office every day and do this job?”
“Because I need the money.”
After a reflective pause, he said, “Everyone needs money. Even God needs money to do his bountiful work. But why do you do it?”
“I guess I don’t really know,” I said. “Why do you make porn?”
I liked where the conversation was going. I was sure he was finally going to tell me he understood where I was coming from; that, yes, he was doing a despicable thing for money, for greed; that he knew it was not the sort of work befitting a man of God; that if his kids knew that it would crush him; that he wished he could find a way to stop. But he just leaned back and swung from one side to the other in the pleather desk chair he had won for bilking more fees out of helpless borrowers in a single month than anyone else in the office. And with his arms comfortably at his side, and his cocksure eyes locked on me, all he said was: “Well, I suppose in some ways I do it for the Lord.”
There was a time in America when we knew the butcher who cut our meat not just as the butcher, but as Jerry from the neighborhood. Sally from around the corner owned the store where we bought our books. Fred delivered our milk. And Tom, the kid that came home from the war and was always sad and wore the same Mike’s Doughnuts shirt seven days a week, was the closest thing we knew to that creepy guy on the corner. “Yes, ma’am,” was the business man’s mantra. “I’d be happy to help you with that.”
But that’s all changed. Jerry has been laid off and is happier at home playing video games and living off the government cheese. Sally is really an Indian man in a large call center in Bangalore. Fred is an ipod app that just processed your grocery delivery order. And Tom is still creepy, but in a I-know-your-daughter-from-Craigslist kind of way.
This is the new norm. And with it comes a lower level of depravity than ever. I remember as a teenager, surely after doing something unseemly that my parents found out about, my father sat me down and gave me the line that we’ve all heard a thousand times: “Character is what you do when no one is looking.” But with all the kiddy-porn-cleaning software and car window tinting and internet anonymity, everything these days seems to be about all the things we can do when no one is looking.
That’s exactly what I found to be true in the mortgage business. And as a borrower, the less you knew, the better off you probably were. Here is the first of a few examples of your friendly neighborhood mortgage brokers. These are actual people I worked with in the chop shop when I first started years ago. Names are changed, not that it matters. Half those guys couldn’t even read.
Billy The Vet
Pros: Billy is in the Marine Reserves. That he got his doctor/father-in-law to get him out of deployment for a BS medical reason one week before his platoon-mates shipped out is almost beside the point. It didn’t stop him from getting a huge Semper Fidelis tattoo across his back. Real loyal guy. Now for the cons: As an Italian, he’s a bit of a characterization of himself. Nothing against Italians. I love their salad dressing. And as a Jew, I’m no one to talk about stereotypes (because, of course, I’m cheap, my nose is four times the size of the rest of my head, and I’m systematically destroying the world with my fiendish love of money). From my experience, most Italians are nothing like this guy. He practically sleeps in a tanning bed, wears only shiny Regis Philbin clothing, wears enough hair gel to save New Orleans from the next “big one”, drives fast sports cars (but only buys 5-year-old models), and cheats on his pregnant wife. That sort of guy.
I had the pleasure of sharing an office with Billy for about a year. We became friends, kind of in the same way you might befriend the guy in your prison cell simply for the companionship over a long period of time even though you’d cross the street to avoid him on the outside. You tell yourself: Yeah, he’s a rapist, but he was always nice to me. Whatever it takes to get by.
Billy kept a rack of neckties, maybe twenty, beside his desk. We were required to wear one every day. He’d come in, sweaty and pimply with muscles nearly busting out of his purple Regis dress shirt. Then he’d grab a tie off the rack and swing it around his neck. It was all a façade. It always was with Billy.
He took steroids. In the office. Our office. He’d close the door, unzip his pants, stick his butt out in my direction, and shove a needle into his cheek. Every so often, the stuff he’d use would come from a different container. “Oh this,” I clearly remember him saying one day, “it’s so my balls grow back to their regular size.”
He’d do this while clients were holding on the phone. He’d be talking to a single mom about the $8,000 it would cost her if she wants him to help her save her home, and he’d put her on hold to shoot himself with steroids. Then he’d zip back up, sit down, and go back to making the world a better place.
But my favorite activity of his was his insatiable appetite for porn. I don’t know where he got so much of it. Keep in mind, this was before internet porn became what it is today. If you wanted the good stuff, you had to buy the DVD. And he did. Hundreds of them. He’d watch them on his laptop with his feet up on his desk and motion to me with his hands as if he was pushing an imaginary girl’s head into his lap. He loved it. He’d be robbing people blind over the phone and watching porn the entire time, barely paying attention to what it was they actually needed. Every so often, he’d start one up and forget to turn down the volume. Sitting a few feet away, trying to focus on my work, I’d hear one of the actors give her line. It would be a naked housewife greeting a plumber at the door. She’d say something like: “Are you here to clean my pipes?” I’d turn around to see Billy turning down the volume. He’d wink at me, go back to his phone call, and repeat his mantra: “Yes ma’am. I’d be happy to help you with that.”
The people of the United States are a crafty bunch. We’re persistent. We’re ambitious. We don’t use the words I Can’t. We found ourselves religiously oppressed, so we sailed across a seemingly endless ocean for freedom. We were taxed to death, so we fought to send the taxman back to Europe. We were undermanned in an agrarian economy, so we withstood the shame of slavery (sixty years after our former English oppressors had the courage to end it). And then, after we tired of stabbing one another with bayonets for four years, we were distracted by the next great cause: applied technology. Between the years of 1860 and 1890, the enduring entrepreneurial spirit drove Americans to apply for more than half a million patents. This was more than ten times the previous 70 years combined. Fast forward a century and change, and we’ve got the new economy, which is kind of like the old economy with one awesome exception: the things worth the most are things we never see, can’t touch, and don’t understand.
In 2008, the FBI investigated 1,644 cases of mortgage fraud. That was more than one hundred times the number of cases from only two years earlier. A crafty bunch indeed. The pilgrims would have been proud had pride not been an unforgivable sin akin to women learning to swim.
So, who were all these sinners driving the Love Boat through the sink drain of America’s real estate market? The Masters of Fraud. Here is an example of the sort of tricks they held up their sleeves:
The Check Is In The Mail
It’s pretty smart at first, but it requires a fairly high level of depravity. Let’s say there is a guy named David. He has spotless credit and he smells terrific. Any bank would love to lend him money. In fact, they’ve lent him money in the past. And when they did, Joe the broker got him the loan. So when Joe got the idea to make some big bucks, he readied an application for a new loan for David. It had David’s name, his social security number, his employer’s name—everything. All the documents he needed were already on file. He didn’t even have to call and bother David. He cut and pasted David’s signature from the last loan and sent the new documents out to the lender. The problem was that the loan was for the purchase of a home which David had neither seen nor heard of and had no intention of every buying.
Joe then goes out and finds himself a mark, who we’ll call…Mark. Mark has crappy credit and he smells like Subway no matter how much he washes. Much like his high school classmates, the banks don’t like him at all. But he still needs a place to live. Luckily for him, Joe makes him an amazing offer: come move into this great $300,000 home, pay an oddly low monthly payment of $1,500 directly to Joe who will make the mortgage payments himself until the time when Mark can get back on track and purchase the place himself at a discounted rate. After all, he’ll have been making the payments in the meantime and earning some equity along the way.
With the help of shady real estate and title company agents, the no-money-down loan gets approved in David’s name. Joe signs the closing documents himself (using David’s name), the previous mortgage belonging to the seller gets paid off, and the proceeds go to the seller. Here’s where it gets fun.
The seller is Joe. He bought the place for $200,000 a few months earlier. He got an appraiser to value it at a 50% increase. After paying off the mortgage Joe had on the property (which was also a no-money-down loan), Joe splits the $100,000 profit with his cohorts. Not bad—and also, not done. So what happens to Mark? He’s living in what is actually a $200,000 home—still not bad for what he’s used to and the price is right at $1,500. But when Joe collects those payments, instead of paying the mortgage, he pockets the cash. When the lender comes knocking on Mark’s door a few months later, Joe is nowhere to be found. Mark gets evicted, and the lender has to sell the place. In a decent market, lenders typically take a 10% hit when they sell a foreclosure. In a bad market, it’s much worse. They’re $300,000 into it, and it’s only worth $200,000 to begin with. Sucks for them. Oh yeah, and let’s not forget about David. He’s the one the lender comes after to foreclose upon. Remember, it’s his mortgage. His credit is going to suck for the next ten years. And if you’re into trends and statistics, the likelihood is that there are five other Marks out there living in five other homes that are secured by five other mortgages—all under David’s name…because Joe is persistent. He is ambitious. And he doesn’t use the words I Can’t.
When I was five years old, I wasn’t too familiar with the difference between right and wrong. That’s probably why I dressed up in my sister’s clothes and microwaved goldfish for kicks. But what I was familiar with at that age was how to do arts and crafts. I spent half my day in kindergarten class with a scissors in one hand, Play-dough in the other, and a crayon in my mouth. To be my kindergarten teacher would have been a breeze. The secret to a successful day was clear, simple, and easily attainable: don’t leave me unattended.
Despite my constant practice, I happened to suck at arts and crafts. Let’s face it: some people just aren’t gifted. So when I went to work at the chop shop, this was a skill that I was going to have to live without. Fortunately for some of my associates (and unfortunately for you), I was in the minority. They were great at it. There were two echelons of these artisans. Today, we’ll talk about the first group.
The Finger Painters
The Finger Painters were exactly what you’d expect any adult who still painted by numbers to be like. They were lazy and stupid. They thought they were the smartest guys in the room because they simply had no sense. Here were a few examples of their shenanigans:
The Xerox Special: Let’s say Joe the mortgage broker sat you down and walked you through roughly forty documents that required your signature. It was a pain in the ass. Then, throughout the loan approval process, certain aspects of your loan would change. Maybe it was the rate or type of loan. Maybe the fees Joe charged went up. Every time something changed, the lender would ask for new forms to be signed. Instead of interrupting your busy schedule, Joe would take the old version of that form, Xerox it, cut out the old signature and affix it to the new one. Roll that bad boy through the Xerox one more time and…voilà! He’s saved you the hassle. Harmless, right? Sure. Until you got to the closing and the title company was too busy to walk you through the documents themselves. They were there to protect you, and they failed to do so time and time again. Instead, they’d ask Joe to do it for them and still charge you the fee as if they did it themselves. Joe would rush you through the document signing while distracting you with personal anecdotes and joint aggravation about having to sign all those documents again. It would all be over quickly—he’d make sure of that. You’d be out the door in no time and on your way home to shove those loan documents in some back closet. It would all be a distant memory until a month later when your mortgage statement came and it was $1,000 higher than you expected it to be. Then you’d look at those documents a bit closer. That’s when you’d see the extra $3,000 Joe pocketed for selling you an above-market rate and a penalty for getting out of the loan within the next five years.
The Pay Stub Two-Step: This one was easy. Step one was when Joe changed the job description on your application to something more amazing than it was in reality. The airport baggage handler became the Cargo Tensile Engineer. That sort of thing. Then, for step two, Joe took a copy of your pay stub and changed the numbers around so it looked like you made three times what you really did. All it took was a pair of scissors and an Elmer’s glue stick. Eventually someone came out with software programs and websites to make it all the more professional. Joe could have approved you for a mortgage payment three times higher than you could’ve ever hoped to afford. Everyone wins, I guess.
The Credit Cut and Paste: Let’s stick with your guy Joe. You seem to really trust him. There are two ways to go with this trick.
Option 1: Joe pulls your credit. The only thing most lenders really cared about in those days was the credit score. Maybe you’re the sort of person who doesn’t honor your commitments. I’m not here to judge. So what? Your score sucks. Easy fix. Joe would cut out numbers from other places on the credit report (there are numbers everywhere on that thing) and paste them into the right place to give you a better credit score. You get approved for a loan you couldn’t have otherwise gotten, and everyone wins, except the lender. The reason the lender loses is because you end up not making your mortgage payments. And of course that’ll happen. That’s why your credit sucked to begin with.
Option 2: Joe pulls your credit. Maybe you’re the sort of person who has never missed a payment. You’ve got a great score. But Joe goes ahead and cuts your score out and replaces it with a new mix of numbers anyway. All of a sudden, your score sucks. Now, why would Joe do that? Easy answer. Have you ever heard of sub prime loans? Of course you have. The rates for them were much higher than the rates for people with good credit. If Joe can slide you into a sub prime mortgage, he’s likely to make a lot more money by adding on special features to your loan like a pre-payment penalty or a rate that adjusts quickly and often. You might ask: Why would anyone not see this for a ruse? It’s the same reason why I went through kindergarten using right-handed scissors when I was left-handed: I was too embarrassed to tell anyone something was wrong. People tend to want others to think they’re in control, even when they know they aren’t. So they take what they’re given. Don’t believe me? Read the newspaper.
Next time: Arts & Crafts, Part 2. Forget these glue-sniffing, window-licking, finger-painting amateurs. It’s the Masters who really knew how to get stuff done. While the Finger Painters were wondering why glue tasted so different than White Out, the Masters were busy making their own concoction.
I once read about a thief who broke into Paris MOMA. You know those guys usually get caught, and when they do, it’s after being holed up for three weeks in a coal cellar littered with Brioche Doree wrappers, a bin filled with their own waste, discarded cans of Carlsberg, and, of course, $120 million worth of Picasso. I remember thinking: What an asshole. And as far as I knew back then, that was the end of the story. But thinking about it now, that guy was probably just a low-level canvas-plucking pawn in a much bigger game. Somewhere in the tall hills of Montenegro was a slovenly art dealer with clients too rich to imagine. He was the real crook.
The mortgage racket is no different. The real crooks in this business are the chairmen and CEOs like Lee Farkas (he of the quote: If I owe you $100, I’ve got a problem. If I owe you $1 million dollars, you’ve got a problem.). But for those who feel victimized by the financial massacre, the bad guy, the moron in the basement left holding nothing but his manhood and a resume that reads Don’t Hire Me, is the lowly mortgage broker. He is the one at the pillory, the Lieutenant William Calley of this particular massacre. No doubt, there are many brokers who are decent people with clean hands. But there are plenty that deserve the reputation that precedes them, and those people always used to be found in the same sort of place: the chop shop. Upton Sinclair would’ve feasted on these places. When I got into the business, I spent eighteen months working in one.
All chop shops have the same basic business plan:
1. Find a steady supply of warm bodies. After the great dot com employee purge of 2000 and 2001, there was an endless stream of people who needed to pay for their Kenneth Cole habits and used BMWs. This was the next boom. Easy work with high reward. It was one of the few financial sales jobs you could get without any sort of government licensing or background check.
2. Secure a company name geared to make people think you are a legitimate financial institution. Borrow a solid brand name and tweak it. Chase Bancorp would have been a solid choice.
3. The bait. Send out direct mail fliers that reference the homeowner’s current lender that make them think they are being contacted regarding some sort of urgent communication.
4. The switch. Give them the bad news (credit history, high rate, etc.; there are countless examples, and we’ll delve into this another time). Berate them until they understand that they are completely screwed and surely to miss out on the plummeting rates. Then the deliver the good news: You’re here to help them get out of their jam.
5. The burn. Sell them the highest rate or the riskiest program or the biggest up-front junk fees you can without them walking away.
6. The churn. This is during a time when the rates went from the low 7s (2001) to the 4s (2009 and beyond). On a loan amount of $250,000, if you lower your rate by a quarter point, it’ll save you roughly $50 each month. For a lot of people, that’s decent money, considering it’s more than $18,000 over the life of the loan. If someone can convince you of this once, chances are they can convince you of this again. And again. And again. They could have refinanced you 10 times. Each time your payment would have gone down. Each time the broker could have made anywhere from $1,000 to $5,000. Maybe this would come out of your equity. Maybe out of your pocket. But the worst of this was for those in the most pitiful shape of all. For those whose credit sucked and were about to lose their home, they would have done anything to save it. Even pay upward of $10,000-15,000 for one refinance. This would come out of the equity in their home—an equity created by the bogus inflation of a bubble market. In time, when the values came down, they’d just owe that money to someone else when the lender came knocking again. And they always did, because some people were just meant to be tenants.
The people who owned these places didn’t need to be smart. Predators seldom are. They just have huge balls. The chop shop that I worked for had two owners. They came to disagree on a number of things, so they split up the company. The newly created company was run by a guy named Todd. On top of committing gross amounts of fraud, Todd also found time for a side business. When the FBI busted through the front door of his business suite to arrest him for a real estate scheme, he grabbed the most valuable possession within reach and fled out the back door. I’m sure it made sense to him at the time. His house was on fire, so to speak. When he ran into the clutches of an FBI agent stationed at the back door, a cloud of white dust billowed into the air and settled on the two men’s faces. In Todd’s arms was a plastic bucket filled with 328 grams of cocaine.
What an asshole.
I’m a salesman. I work in the mortgage business. When I got into the industry a decade ago—before the waves of Jiffy Lube attendants and tae bo instructors joined the herd—it was just another way to make good money. And I did, right from the start. But now, handing someone a business card that says ‘mortgage’ anywhere on it is like being on a first date and slipping a note across the table that reads: “Hey, I have gonorrhea!”
It wasn’t always this way. There was a time when I’d avoid telling strangers what I did so that I wouldn’t have to help them sort through their personal financial nightmares. We, the people who do what I do, were at the cool kids’ table in the lunchroom. We were popular. We had the answers they needed. We had the money they wanted. And so it went, until someone got hold of the idea that we’d been picking their pockets the entire time. I suppose it’s fair in some ways, if you’re comfortable with the idea that everything good that happens to you is the result of you just being awesome, and everything bad that happens to you is the result of someone else’s treachery. No matter the reason, here we are, back at the nerds’ table with the Wizards of Warcraft kids.
As with any sales job, each day is a hustle. It’s invigorating. It’s disgusting. It’s frustrating. It’s absurd. And I have a strange feeling that it’s killing me. So I’ve decided to share my experiences with you. Maybe some of what I have to say will sound familiar. Maybe it’ll be new. Maybe it’ll brighten your day. Maybe you just won’t care. If nothing else, we’ll spend at least one brief moment together. And that’s good. Because, after all, nobody wants to die alone.