Mortgages from the Dark Side, the Rebellion has Started

The trouble in the mortgage lending industry was first revealed to me shortly after accepting my first job in finance.  Upon graduating college with a finance degree I took the first finance job available.  Since I had bills to pay and the job market was weak I took the first employment opportunity offered.  The job was an assistant finance manager at a local finance company not far from my apartment.  The company was engaged primarily in the origination and collection of personal loans and mortgages, mostly second mortgage or home equity loans.  This finance company was a division of what is now the eight largest bank in the nation.  Not the best job but far from the bottom.

Shortly after the training concluded, I learned that there were three activities you took part in at the finance company.  You sold the consumer loans, you closed loans and you collected the loans or the payment on the loans.  We ate lunch and used the facilities too, but other than that we sold loans, we closed on the loans and we collected the loans.  The reason we spent so much time collecting loans was that the delinquency rate at finance companies is fairly high and it is necessary to stay on top of the customer in order to make sure the client makes timely payments. 

Nothing overtly wrong with these lending activities.  Except, there were at least two glaring immoral deeds that we committed.  One was that we spent a third of our time on the phone selling loans.  Let me shed some more light on what I did.  I was on the phone selling loans to your neighbors constantly.  These sales calls had a strong pitch and were performed with unrelenting tenacity by myself and peers in the industry.  Sure it was a fairly high interest rate since this was a consumer finance company and we did not offer the most competitive interest rates and your neighbor really didn’t need to be bogged down with more debt, but I was selling money.  I sold a consumer loan, either a personal loan or second mortgage to help your neighbor buy a new car, go on a family vacation or maybe even consolidate debt. 

It isn’t necessarily cocky to tell you your neighbor didn’t stand a chance.  I sold the low monthly payment, hell I couldn’t sell the outrageous interest rates, I sold the neighbor how he can use this money for the vacation his wife and kids deserved, I sold an escape, a low monthly payment escape that your neighbor was entitled to.  He didn’t stand a chance; he couldn’t say no.  He took the loan.  I wasn’t going to let home say no.  Sometimes that took 10-15 phone calls until they said yes. 

Once I closed the loan, which is lending speak for having the customers execute and sign the appropriate loan documents and disclosures, and some timely monthly payments were made, I picked up the phone and sold your neighbor more money.  I sold the benefits of refinancing and taking out more cash on top of the existing loan so he can finish the patio and buy the new grill and eat some tasty USDA prime rib eyes.  He went for it.  Hey, he didn’t stand a chance, I was good at it, and we were selling money. 

Sales rule number one in most businesses is that the present customers and former customers are your best candidates for additional sales, in our case that would be additional loans or larger loans to the existing accounts.

After a few years or even one or two years, I may have refinanced this customer three times and elevated his debt load significantly.  Eventually, this loan and the other debts your neighbor has are killing him.  He can’t make all the monthly payments.  His wife is now pissed given that she can’t use her credit card at the grocery store since the credit card limit has been reduced because they can no longer make their payments on time.  And after numerous sleepless nights, the neighbor finally decides to go for a fresh start and files bankruptcy. 

This is a situation I witnessed every year in consumer finance and mortgage origination’s, equity extraction with first mortgages and home equity loans as well as consumers loans and excessive credit card use was letting consumers live well beyond their means.  These individuals and families were making $75,000.00 ( as an example ) and when I would pull their credit report one year later they had an additional $15,000.00 in debt.  That doesn’t sound crazy at first except you have to consider that these are mature workers who are not likely to be looking at large pay raises in the foreseeable future.  So, Mr. & Mrs. Jones are making $75,000.00 and I add their new debt and it appears they are spending $90,000.00. 

The easiest solution for them was to incur more debt with a home equity loan or mortgage refinance and keep the party going, never paying attention to the fact that they spend more than they make almost every single month of the year.  And this was common.

Eventually, the music stops and these people can no longer borrow more money or consolidate what they have to a lower payment and it times to pay the piper.  Their house of cards built on easy money comes to end with bankruptcy, foreclosure and other unpleasant outcomes.  Some customers run to file bankruptcy to eliminate these consumer debts or create a new manageable payment plan, but most of my customers agonize for months over the thought of bankruptcy.  It tears their family apart and it weighs them down terribly. 

The company I work for has a position on bankruptcy that is similar to most mortgage lenders, banks and credit card companies which is that bankruptcy is evil and should be restricted.  At the Dark Side Lending Company, we even attended the bankruptcy hearings.  This is a very uncommon practice.  Chase Bank, Chrysler Financial, Countrywide, none of these creditors would normally attend a personal bankruptcy hearing.  We do, basically to shame the customer into making payments or reaffirming the debt with us.

There I am, the man who may be the most responsible for driving this family into bankruptcy because of my sales skills and the incredible marketing support of Dark Side Lending.  Boy was I ashamed.  I see this family in bankruptcy court and my heart falls into stomach.  I can recall all the sales calls I made to them over the past couple of years.  Not a few sales calls, but sales calls every other month, every year.  Telling them how great it would be to take another loan. 

I wake the next morning and do this all over again.  Over sell the loans, close on the new loans and collect the payments one way or another.  It got to the point where I took a shower before I went to work and I took a shower when I get home to clean the filth of the industry off of me.  A practice I repeated at various lending institutions I worked at for the next twenty years.

These families, your neighbors, which are struggling with payments for a whole host of reasons one of which is because I sold home loans they could not afford.  Sure they had responsibility.  But, I can not emphasize enough, I am good at my job.  I can sell loans.  You don’t stand a chance, you try to say no but I’ll get you eventually.  And it wasn’t just me.  Lenders whether they are mortgage lenders, banks or credit card companies across the nation market and advertise in the mail, on the phone, on the Internet on prime time TV and late night TV.  You can’t escape the marketing muscle of the Dark Side of Lending. 

One day when I was watching the Bears play with my dad and we had a discussion on consumer debts and bankruptcy.  At this time, one of the bankruptcy reforms bills was working it way through congress.  During this discourse I told him that bankruptcy statues exist because of me.  After he laughed for quite some time, he asked for a little elucidation on that statement.  I explained that consumers file bankruptcy because of sales men, or finance managers like me who shove these loans down the consumers’ throat and bankruptcy is a necessary evil to even the field against the marketing muscle of the Dark Side of Lending.  I assure you the force on the Dark Side is strong.

Why do we have bankruptcy reform to make it harder for the consumer to escape the likes of me, it’s simple.  The banks fill the congressional coffers with cash.  Oh yeah, the other side of the story is that somehow congress thought bankruptcy reform was good for the nation and the American people.  Wow.  How is that possible? 

Ever since that time, if a friend or a friend of friend asks me about filing bankruptcy and the impact on their credit, etc…my reply is always the same, file and file often.  Stick it to the lenders.  Run the credit card up and file bankruptcy.  It’s your duty as a citizen to make up for all the misdeeds performed by consumer finance companies, mortgage lenders and credit card companies by wiping out the debt and handing a loss to the lenders and bankers.

This was a start of long career working with the Dark Side of Lending.  This was just the beginning.