March 12th, 2011 1:55 PM by Chuck Green
I was thinking the other day about the role of the mortgage broker, in this new world where banks seem to rule supreme, and where they make their own rules about how and when they decide to lend (or not lend) and work (or not work) with mortgage brokers.
Mortgage brokers, it seems to me, bore a large share of the blame for the financial meltdown, and I have never been comfortable with this characterization. Having been in the business almost twenty years now, I can say with confidence that the vast majority of all mortgage brokers I have known were honest and hard working Americans.
The lending products sold during the crazy years from 1995 through 2005 or so were all products designed on Wall Street. The big banks, including Washington Mutual and World Savings, and countless others, came to the mortgage broker community with these products and provided training and support to sell the products designed by executives at the highest levels of these companies.
Their products included no-income verification, no asset verification, light-doc and no-doc and 100% financing loan programs of just about every shape size and color. After some of these meetings I remember talking with my associates about how crazy it seemed to be offering loan products to individuals who could not really demonstrate reasonable credit or income, or source their assets and down payments. But most of the lenders were offering these products, and who were we (we would think) to question the product skills of these highly paid executives, and their knowledge of the secondary mortgage markets, where mortgage backed securities were bundled and sold?
We all knew that regulators were in place. We all knew that there were ratings companies; highly respected companies like Standard and Poors and Moodys that would rate the risk and salability of mortgage backed securities.....surely if these reputable companies were "in support" of these products, then who were we to question the wisdom of these products?
There was no mortgage broker on the planet with the power and authority to file a complaint. A boycott of these products was pointless; clients would just flow to competitors. Simply put, there was nothing any mortgage broker could have done to slow or prevent the financial meltdown.
I don't mean to say that there were no abuses, and that every mortgage broker was a saint...this was absolutely not the case. There were (and still are) mortgage brokers who should not be allowed to practice. But to blame mortgage brokers for the financial meltdown would be like blaming your bank teller for high ATM fees. The blame does not rest with those who came into contact with the public....they were doing what they were trained to do. The blame should go straight to the top where these decisions were made.
Regrettably, there have been very few corporate executives who have taken any heat whatsoever for their actions. Despite profiting at the expense of the general public, most of these executives exist today and continue to be overcompensated. They basically "raped" the country and got away with it.
The political parties rely too much on campaign contributions to pursue legal action against these executives, so there is almost no chance that they will face the consequences of their behavior.