How To Sell A Subprime Mortgage Part Two: Finding the Customers

Ding Dong, Free Money Calling

There I was, a brand new loan origination officer without the first idea of how to originate a loan. It took me a few weeks to figure out that Aames Home Loan hired me because I had years of phone experience and absolutely no mortgage experience. This was not the difficult situation you might think. At the time I had been a telesales professional for nearly fifteen years. I had sold everything over the phone from newspapers to time shares. It was a matter of using established skills and fudging while filling the gaps in my education.

By now many of you are wondering what the real estate board was doing while a total ignoramus like me was busily trying to originate loans. Unfortunately the real estate board had no control over Aames, because Aames Home Loan was registered and regulated through the Bureau of Corporations. Real estate loans were being sold independently of real estate law. Licensed real estate brokers expected their loan originators to have real estate licenses and to conduct business under the real estate board’s code of professional ethics. The Bureau of Corporations didn’t have a code of ethics to enforce. Of course the fraud laws were enforced, but unless a customer made a complaint, who cared? As far as my bosses were concerned, the only thing that mattered was originating a loan. This was my first exposure to Wall St.’s one and only commandment: Thou Shalt Not Get Caught.

Finding Customers

An important part of my duties as loan origination officer was to find customers to originate loans with. That was also not a very difficult task. I joined Aames during the last year of the Clinton Administration and the tech bubble had not yet burst. Many people felt prosperous but carried tremendous credit card debt. Most dotcom CEOs didn’t have any cash assets and bought everything on credit. They assumed that their stocks would keep up with their debts.

Other people were caught in the Clinton recession. Outsourcing and high interest rates kept their wages down while inflation ate up the value of the dollar. Credit cards were the difference between eating at the end of the pay period or visiting the food bank. Many of those customers saw a subprime loan as the logical strategy to save their failing credit scores. They could get a subprime loan to pay off their credit cards. When their scores improved, they could refinance again for a lower interest rate. Rapidly increasing property values guaranteed there would be enough equity for another refinance in a couple of years. At least that’s what they thought.

During the first few months of my subprime career, I had enough call-ins to assure that I made my weekly quota. However answering the phone was not my prime duty. I was supposed to get on the phone and telemarket for customers who were not calling in. There were two reasons for this. First, very few subprime loans got through the underwriters. By the middle of the month I would have over twenty loans in my pipeline. By the end of the month only one or two of that twenty funded. Second, Wall St. owners did not care that the underwriters killed most of our loans. They needed more, more, more, because they had squandered Aames’s cash reserves and sold off all their loans to make up the difference. They had to keep selling mortgages on the front end and discounting them to other lenders on the back end in order to keep solvent.

Soliciting Business

Now I am going to reveal one of the most carefully guarded secrets in the universe. Yes, dear readers, I am going to tell you how telemarketers get your phone numbers. I started out calling from Aames’s own mailing lists. Every week I received a huge packet of names, addresses, and telephone numbers that Aames had been compiling for the twenty odd years of its existence. Now, remember that this was a Wall St. company. They did not send me the updated lists. My lists came out of the archives. Many of the names were of people who were no longer upon this veil of tears. One very prominent name on the list was Larry Fine of the Three Stooges. I asked the district manager why I was calling from the archives, and he replied that the archive files were bigger and had more names. I pointed out that the archives were full of wrong and disconnected numbers. He replied that some of the wrong numbers might become loans. This was my first exposure to Wall St.’s favorite word: might. Wrong numbers might become loans. People might change their minds if you have the loan originators calling them every ten minutes. Some of the most incredibly stupid ideas and orders were justified by the word might.

From the time I started the job until a few months after the crash of 2000, I got enough originations to keep even a Wall St. manager happy. They were mostly from people who called in. This was good because I was still learning about mortgages. Later I discovered that title companies provided free calling lists for subprime lenders. They proved to be the perfect calling lists, with the customer’s interest rates, what companies sold their mortgages, and who had already refinanced withing the last few years.

There were about four or five subprime companies with much higher interest rates than Aames. I could ask for lists of people with mortgages from those companies. I could also ask for a minimum interest rate, and the title companies would open up their records and give me all I asked for. It was almost like picking my perfect customers. I could also ask for areas outside of Aames’s usual calling areas. I chose areas around Lake Tahoe and up north toward the Oregon border. The property values were lower so the commissions were not tremendous, but people in the wild west needed subprime mortgages too.

Eventually I went to city hall and paid for my own lists from foreclosure records and current tax records. Those cost about sixty cents a name. This gave me a pool of home owners off the Aames list and who had not been contacted by Aames. Once again I had the advantage. Aames badly wanted to make loans in Oakland because of the inflated property values. Falling down shacks were being appraised at over a million dollars. Of course this was all part of the Clinton bubble that was slowly deflating even back then.

The Back Door.

Now, you might think that with all the applications I was taking, we would be writing loans left and right. Nothing is farther from the truth. I think that the highest output the Aames Oakland office ever wrote was five loans in a month. This is because Aames changed their management, their advertising, their marketing, and their sales cycle, but they could not change their underwriters. Aames was using the same underwriters as when they were privately owned by a family named Judah. These underwriters were a very conservative lot. They were looking for high interest variable loans that could be refinanced as a lower fixed rate. Anything outside those very strict guidelines were examined under a microscope and generally rejected. Even variable to fixed rate loans were rejected for any number of reasons. The most common reasons were income or FICO score.

A common way of getting around the underwriters was to share applications with other subprime companies. If the loan looked good, but the underwriters rejected it, another subprime company’s underwriters might accept it. There are no standards in underwriting. As long as the underwriters don’t discriminate they can accept or reject any loan for any reason. It all depends on how much risk their mortgage banks are willing to take. Applications (known in the trade as paper) were swapped all the time. It was common and acceptable practice. Aames had a rule against it. Their reasoning was that the customer’s situation might change some day and we might get the loan if we resubmitted it in a few months. Considering that FICO scores drop faster than they rise, one has to marvel at the logic behind the decision.

This did not stop paper from being swapped from the Aames office. It was simply done behind management’s back. Once again only one rule applied: Thou Shalt Not Get Caught. Besides, Aames was more than happy to submit loans we picked up at the Back Door. The worst thing about it was that I didn’t get paid on any of the loans I originated which disappeared out the Back Door. Considering how many loans the Aames underwriters turned down, I hate thinking about how much money I generated for Beneficial and Countrywide that I never got paid for.

Loan Farce

Needless to say, Aames management was ready to gnaw off its collective legs because of all the loans that fell out of the pipeline. The logical thing was to expand their pool of mortgage banks. There are no rules that say a bank or corporation can’t deal with more than one mortgage bank. Either the Aames management was too stupid to think of it, which I almost doubt, or the other underwriters were not willing to work with Aames. Considering some of the crooked things I heard come out of other mortgage companies, I doubt that as well. Regardless of the reason, the Oakland office never generated more than five or six loans in any given month I worked there.

Dumping on the sales teams was management’s solution to everything. If loans kept falling out of the pipeline, it was because we were finding the wrong customers. The most amazing orders came out of the main office. For instance, we were to try to find people with B credit or better. Nobody told us how we were supposed to know their FICO scores before we pulled them. It was still our fault for not knowing. Another management obsession was the property values in Oakland. The tech bubble had expanded across the bay from San Francisco to Oakland, and property values had expanded to rival San Francisco’s. Falling down shacks that had been worth about ten or twenty thousand a few years ago were appraising for 100 thousand or more. These too-good-to-be-true property values had Aames managers slobbering like dogs in front of raw steaks.

Oakland is populated by poor minorities who were too smart to risk their homes. I had more than one Oakland homeowner tell me that he did not believe these property values. Others told me their mortgages were either paid or almost at their last payments. These people were too smart to go back into debt. The Aames managers were not about to take no for an answer. They kept up the pressure in Oakland until Aames became a very unwelcome name. Local consumer rights organizations targeted Aames as a predatory lender. What gave them their first clue?

Aames’s obsession with Oakland culminated with the institution of Loan Force. Loan Force was a retooling of the famous Sales Force software. I have worked with Sales Force in subsequent jobs and found it to be an excellent product. I could not recommend Sales Force more highly. Unfortunately it was a disaster in the hands of the Aames management team. The first things those geniuses did was load the software with the same beat up names and phone numbers that I was forced to use when I first started. They were exactly the same. The late Larry Fine’s name and phone number was still on them. Of course the first load of leads was Oakland. Oakland homeowners were so sick of being called that they just hung up on me. I ignored Loan Force (which we quickly began calling Loan “Farce”), and went back to my own lists.

Soon I got a nasty phone call from the district manager for not using Loan Farce. It seemed that he had nothing better to do than to monitor everybody through his master screen, and make sure everybody was working. I once again complained about the lists he was making me use, and again pointing out that Larry Fine had been dead since 1975. The district manager replied that I could easily have my own lists uploaded to Loan Force. He gave me the number of the person in charge and told me that it would only take three days to upload them. I called the person in charge. She said it would take two months to upload them. I called the district manager back and he refused to listen to me. He ordered that it had to be done in three days so it would be done in three days. I told that to the person in charge of uploading the lists and she laughed at me.

Loan Farce reached the peak of idiocy the next day, when the regional manager had every office in California call Oakland. The poor Oakland homeowners were getting a call from Aames every twenty minutes. The people who bothered answering responded somewhat vocally. Some of the things they told me to do were anatomically impossible. This time I called my regional manager about it. The regional manager was actually competent, but was helpless in the face of the district manager. The regional manager said “maybe they will change their minds between phone calls”. That had to be what the district manager told him to say. Several weeks later, he quit.

At that point I was looking for a new job as well. I figured out how to make my quota by making the regional think I was using Loan Farce. I called from my own lists and marked off the calls on the Loan Farce list. I was still able to work effectively while humoring the regional manager. When I got an application from Truckee when I was supposed to be dialing Oakland, I just told them it was a call back. They accepted it. After all, the rule was, Thou Shalt Not Get Caught, and they really weren’t looking very hard.

Just Reach Out and Take It

Meet The New Boss, Same as the Old Boss

Tell the Congregation God Loves Me, And I'll Give You $110K

Obama is campaigning and promising us change, but is change anything more than a campaign promise?   Obama has not provided a time line for withdrawing our troops from the Middle East.   He has not promised the end of Homeland (in)Security. So what sort of change can we reasonably expect from a candidate who is not promising to restore the SEC or the FTC, even though the economy is tanking all around him?   What can we expect from a candidate who came into Washington through the Chicago machine?   Chicago is home to one of the oldest and crookedest political machines in the nation.

Barack Obama has proven this by his promise to expand Bush’s Faith-Based Initiatives. I suppose that the biggest change that we can expect is that the bribe money will be going to Obama’s supporters rather than to Bush’s supporters.   Looking at things from a deeper level, if Bush’s supporters want to keep their fat bribes, they can switch their alliances to Obama.  Maybe this is why The Washington Times has become a little critical of Baby-Doc Bush of late.   The Times is fully owned by Sun Myung Moon’s Unification Church, and the Moonies are the biggest recipients of Bush’s Faith-Based Initiatives. Maybe they are hoping that the gravy train will continue under Obama.

What gives?  Barack Obama has promised change, but all I’m seeing is another corporate candidate who is going to continue the same failed policies that America has been following since 1980.  The United States illegally invaded two countries and the Democratic Speaker of the House “took impeachment off the table”.   Obama still has not presented us with a withdrawal plan.  The cost of health care has become impossible, and Obama is presenting a health care plan that penalizes the poor while assuring massive profits for the health insurance industry.   Now with the economy tanking and thousands homeless, Obama is going to take our tax money and give it to the churches just like Bush has been doing. Oh yes, he is going to make some changes, but we all know they are going to be cosmetic changes.   Obama is simply going to reward churches for supporting his policies without doing anything to relieve the suffering of the people who are depending on him.

Stop and think about it.  What is the actual difference between Barack Obama and John McCain?   Everybody and his brother keeps telling me that McCain is insane.  If McCain becomes president, the war will never end.   Would somebody please tell me when Obama committed to ending the war(s)?   If McCain is elected he will use the atomic bomb.   What makes you think that Obama will not use the atomic bomb?   If McCain wins the economic situation will get worse.  What makes you think that Obama will do anything differently than McCain?   Maybe if we are lucky, Obama will throw us a few crumbs. Maybe he will champion same sex marriages and make that a condition to qualify for the faith-based money giveaways.   Maybe he will decriminalize marijuana.   While both of these are important issues, there are other issues that have to be addressed.   Obama is not addressing them any more than McCain is.

That is why I am voting for Nader this election.   I do not like Nader and I am not sure in my mind that he is any more competent to be president than Bush. Nader has presented a time line for withdrawal from Iraq and Afghanistan. Nader supports a single payer health care system which is not welfare for the health agencies.   Nader also supports the elimination of Homeland (in)Security and Faith-Based initiatives.  He is also in favor of same sex unions and legalization.  Since Nader is supporting what I believe in, I am voting for him.  If McCain wins because I voted for Nader, too bad.   I don’t think that the Democrats deserve to win.   I don’t think we will be any worse off with McCain than we would be with Obama.   The only hope that Obama represents is the hope that we project on him.

A Vote For Nader Says No to Corporate Politics

Who’s Fault Is It?

Gored By His Own Policies

Congress is looking for a scapegoat for the current financial crisis.  The Democrats are blaming the Republicans.   The Republicans want the voters to think that it’s the Democrats fault.  They want the voters to forget that the Democrats have only been a majority for two years.  The Republicans are also blaming Fannie Mae and Freddie Mac.   Both the Democrats and the Republicans are blaming Allen Greenspan for everything.   This is fair.   After all, Greenspan served Bush the Elder, Bill Clinton, and The Shrub.

If Alan Greenspan was police chief on New York City, he would be standing in front of a City Commission explaining why street mugging has reached the point where the muggers are driving Mercedes.   Poor Greenspan would have to hem and haw and explain that he was partially wrong for deregulating the anti-theft laws.  Greenspan would elucidate by explaining that he assumed that self-interest would make the muggers regulate themselves.   He never imagined that the muggers would allow themselves to get out of control the way they had.   Greenspan would have to admit that he should have enforced some of the mugging laws.

Now let’s take a look at Fannie Mae and Freddie Mac.   Neither company actually makes the loans.   A representative from the Mac family doesn’t come to the customer’s house and take the application and the supporting documents.  Somebody who works for a broker does that, or, in the case of a subprime lender, somebody who works for a registered corporation.

People who work in subprime are under constant pressure to sell, sell, sell.   I remember working for Aames Home Loans during the stock market crash of 2000.   The corporate office had every satellite office in California calling Oakland because the property values had risen so high.   Those poor people were getting a call from Aames every ten minutes.  Salespeople would intimidate a customer into signing and then quit as soon as the commission check cleared.   I had one manager who was caught with a complete fraud kit.   She had letterhead from several banks, phony pay stubs; everything needed to send phony documents to the underwriters.  Once the loan went through and the three days passed, it was a legal contract and Aames could not rescind the loan, although they prosecuted the manager.

The same mentality dominates the prime loan industry.   The idea was to get the loan no matter what.  I once got fired from a brokerage for trying to kill a bad loan when the customers were hiding credit cards.  The loan went through anyway.   When no laws are being enforced, how are the Macs supposed to tell a good loan from a bad one?  Tarot cards?   To give them credit, The Macs turned down their share of bad loans.  Yet considering that your average mortgage officer has to submit 15-25 files a week, and needs to fund 3-5 of them, the Macs cannot be blamed if one out of the three to five is a bad loan.

There is also another fact that is not being considered, which is that not all mortgages are bad when they are sold.   A refinance or a second mortgage could be sold with all the honesty and good will on earth and could go bad for any number of reasons.   The first mortgage meltdown occurred in April of 2007 after GM sent one of their plants to Mexico and the laid off American workers could no longer pay their mortgages.   That was the domino that started this whole collapse.   More loans have gone bad from outsourcing and unemployment than any other reason.

Which leaves us with the Democrats and the Republicans pointing the finger of blame at each other.   Who elected these people in the first place.   What does this say about the voters who elected Nancy Pelosi?   These people claim to be liberals, but their favorite girl habitually gives Bush everything he wants and a bag of chips.  What does this say about voters who supported Bill Clinton as he signed NAFTA into law and then tore our social safety net to pieces?   A lot of people who cheered Clinton on are now homeless.

Maybe we, the American voters, are responsible for this mess for listening to ideology rather our own best interests.   Perhaps this is our fault for looking at the surface of the issues rather than the substance.  We, the voters, have consistently confused personal liberty with the corporate license to steal.  We swallowed Greenspan’s idiocy about deregulation hook, line and sinker.  The American voter welcomed Reagan with open arms because he promised us that deregulation would make us all richer.  As Will Rogers once said, “we don’t always get the government we want, but we always get the government we deserve”.

You want to get out of this mess, start voting smarter.  The SEC does not threaten your personal freedoms.   If you paid a little more in taxes, the SEC may have been able to save your retirement account.   The social safety net may have allowed you to save your job.  Speaking of jobs, maybe if the American voter supported the labor unions, the U.S might still have a labor base.  That way our currency would not be exclusively based on petroleum production.

It’s time to start ignoring politicians and demanding what we want.  We want a secure economy.  A single payer health system.  More than anything else, we want a government that listens to us instead of dim-weeds like Allan Greenspan.

It's One Thing When the Peons Lose Their Investments

An Open Letter to Queen Elizabeth II

We Are Not Amused

Your Most Gracious Majesty,

It has surely come to your attention that once again, your former colonies in North America have caused another worldwide stock market crash.  We realize this is the second time in eighty years that we have done this, and we assure you that we are very embarrassed about it.  We sincerely hope we have not caused you any inconvenience.  We are very grateful to the Bank of England for lending us over 80 billion dollars to pull our economy out of a hole of our own digging.  Please extend our kindest regards to your loyal subjects in the Bank of England.  We would have been in a considerable amount of trouble without them.

As we are on the subject of embarrassing mistakes, we would like to make amends for another blunder we made about 230 years ago.  That was about the time we rebelled against His Majesty George III.  In hindsight we understand this to have been a very bad idea.  We were not capable of self rule back in 1776, and we have failed to become competent in the last two and a third centuries.  Perhaps we here in the Colonies suffer from a form of cultural Attention Deficit Disorder.  Possibly we suffer from massive brain damage due to our low air pollution standards.  Whatever the reasons, we keep ruining things for the rest of the world.

It is not as if we deliberately destroy the world economy.  We had the very best intentions.  You see, our present leaders promised us prosperity.  They told us that an unregulated market would bring us a stronger economy.  They promised us more jobs, better paying jobs, the sun, and the stars and the pretty moon.  They even told us that an unregulated market would be best for the whole world.  It seemed they were telling us the truth, until the Tech Bubble burst in 2000.  Then our leaders lied about weapons of mass destruction in Iraq.  We understand that your subjects got caught up in that mess. Terribly sorry about that.  Next came the mortgage meltdown, and now the stock market crash.  We just can’t seem to do anything right.

Of course, one of the problems is the leaders we keep choosing.  I am sure Your Majesty can tell us a few stories about Lyndon Johnson and his gallbladder and Richard Nixon’s drinking.  I can just imagine how difficult it was for you to make small talk with poor Mr. Reagan.  People with Alzheimer’s do ramble on so. Let us take this opportunity to apologize for young Mr. Bush.  We do hope your roses have recovered from him landing his helicopter on them.

Looking at Europe, we see your socialized medicine and your social safety net.  You have guaranteed vacations for all employees, and retirement pensions that make ours look sick.  Europe has grown since the Second World War.  Meanwhile the United States keeps falling back to 1929.  Your World Court has guaranteed civil rights for gays, lesbians, and trans people, but American gays still fear for their lives in many parts of the country.  Your subjects enjoy all these benefits, and yet you have the prosperity to save the failing American economy.

There is no doubt about it.  We Americans are not capable of self rule.  We should not even let ourselves out of our homes without a keeper.  We are a disaster that keeps happening to the world.  Your Most Gracious Majesty, we most humbly beg you to save us from ourselves and take us back as a crown colony. We are most terribly sorry about the misunderstanding back in 1776.  We will officially change its name from the Revolutionary War to the Failed Rebellion.  We will posthumously try Ben Franklin, George Washington, James Madison, and Thomas Jefferson for treason and symbolically hang them in the Washington Mall, which will be renamed the Cornwallis Mall.  We will rename Washington, DC “Arnold” after Benedict Arnold, and place a statue of him on the White House Lawn.  The White House will be renamed the Lord Governor’s Residence.  We will even pay for the tea we so rudely dropped into Boston Harbor.

Please take us back. We’re sorry. We’ll be good. We’ll never do it again.

Yours Contritely,

The American Colonists

Our Country 'Tis of Thee, God Save Our Gracious Queen

What Do They Mean That Paris Can’t Run?

Maybe You'd Rather Look at McCain?

Fellow Camp Followers, are you as outraged as I am? Some bean counter at the election board is trying to tell me that Paris Hilton cannot run for president because Paris is too young? Can you believe that? Can you believe the outright audacity of it? This is blatant age discrimination against us dirty old men. How dare they tell mature white male voters that we cannot vote for the candidate of our choice. What is this, Soviet Russia where the state tells us who to vote for?

To make things worse, you will never guess what excuse they used to block Paris’s candidacy? They had the nerve to tell me that Paris cannot run because of the Constitution! Who cares about the Constitution? It’s just a piece of paper, people. I mean, who pays attention to it anymore? Who the hell cares that the Constitution says that you have to be 35 in order to be president? By the time Paris is 35, she won’t be worth voting for. We want Paris now!

The worst of it is the hypocrisy. Right now we have a president in the White House who was not elected through Constitutional means. Nobody kicked Bush out into the gutters of Pennsylvania Avenue just because he cheated in the election. Nobody stops Bush when he gives billions of dollars to Sun Young Moon through his faith based initiatives. Nobody has stopped the government from denying undocumented workers their legal rights under the 14^th amendment. Who cares about the prisoners being illegally held in Gitmo, the lies behind the Afghanistan and Iraq wars, or illegal wiretapping? Nobody seems to care about any of that, and some clerk has the nerve to tell me that my candidate cannot run for the presidency? The nerve of some people.

So the bean counters and the nit-pickers are going to waste more tax-payer’s money by making us do this the hard way. The “public servant” I spoke to said that we would have to have a Constitutional amendment in order to be able to vote for Paris. I say why bother amending something that everybody only pays selective attention to? Let’s just ignore the Constitution and vote for Paris anyway. After all, if the current POTUS can just ignore the constitution any time he wants, why the hell can’t we?

So vote for Paris Hilton, the Only Change that Matters in Washington.