News today out of Fort Wayne, Indiana shows a mortgage broker accused of being personally responsible for some $5.5 million in fraudulent loans and 150 foreclosures:
A federal grand jury has indicted a mortgage broker on wire fraud charges in connection with loan applications he filed on behalf of a father and son for their purchases of 55 homes. The indictment returned Thursday charges that Justin L. Stuckey, the owner of Maximum Mortgage in Fort Wayne, obtained fraudulent loans in 2002 for investors buying rental properties. Stuckey also faces a civil lawsuit over allegations that he was involved in some $5.5 million in mortgages that resulted in nearly 150 home foreclosures. Stuckey, however, told the newspaper in March that he had done nothing wrong. "If I did anything illegal, it's been almost five years since those loans were made. I would have been charged by now," Stuckey said. "I could write those loans again today. ... I just want this stuff to end so I can get back to doing my business. It's what I'm good at."
One broker. 150 foreclosures. Kind of eye-opening, isn't it? I personally find his laissez-faire attitude unbelievable. Instead of flatly denying he did anything wrong in the face of a grand jury indictment, his response is that those loans are so five years ago, and he's got more important things to worry about? Our industry has plenty of good people in it, but let's face it: the housing boom brought out the scuzz-buckets in spades. The fact that anyone with a pulse could broker a mortgage in many states didn't exactly help matters any, either. Here's an email I received from a reader a few months back:
What happened to the $1 billion in stated and full document 80/20 loans that I personally funded in the midwest in 2006? Consider this: I'm only 1 of about 250 account executives in the Chicagoland area. Let's assume $30 billion a month in subprime loans were being funded in the whole year of 2006. 60% of those borrowers cannot refi under current guidelines. Two words...housing meltdown.
The blame game is just getting started. Were brokers implicitly involved in setting up borrowers for a fall, or were they merely offering products thrust upon them by a voraciously hungry Wall Street? It doesn't help to see mortgage brokers going off in none other than the WSJ today that they don't care about the borrower -- all they care about is the YSP:
"The mortgage broker does not represent the borrower," says Chris Holbert, president of the Colorado Mortgage Lenders Association. "We sell access to money."
Apparently the strategy from the broker lobby -- designed to fend off legislative focus, of course -- is to paint brokers as Wall Street lackeys, merely following their marching orders and seeking to get the largest spread possible. Mark my words: this is a shortsighted ploy on the part of the the broker lobby, and they'll regret doing it. Pretty soon consumers will begin to wonder why they have to pay $10,000 to someone who's merely the middle fiddle and isn't -- apparently -- bringing any value to the table beyond their desire to get the largest spread possible on a deal. Consumers are already starting to ask similar questions about the realtor side of the business. UPDATE: Tanta over at Calculated Risk noticed that same WSJ article I did, with about the same reaction to it. Great minds think alike, no?