BOOK REVIEW: ‘Refi-Bust’ Rips Into Crooked Mortgage Brokers; If a Loan Offer Sounds Too Good to be True, It Is, Says Former Ohio Mortgage Broker Turned Expose Author
Mark Twain on bankers: A banker is a fellow who lends you his umbrella when the sun is shining, but wants it back the minute it begins to rain.
Reviewed By David M. KinchenHuntington News Network Book Critic
Hinton, WV (HNN) – In the case of a mortgage broker – at least the predatory, unscrupulous ones described by David Lawrence in “Refi-Bust: Mortgage Brokers Gone Wild!” (Booksurge Publishing, $18.95, 174 pages, paperback) -- the “Mr. Egos” and “Big Mels” he describes will gladly sell you another umbrella for $2,000.
The characters depicted by Lawrence, who worked as a mortgage broker in Ohio, could have come from the typewriter of David Mamet, who depicted shady real estate salesmen so brilliantly in “Glengarry Glen Ross” a Pulitzer Prize-winning play that was made into a wonderful 1992 movie starring Al Pacino, Kevin Spacey, Jack Lemmon, Alec Baldwin and Alan Arkin.
When I suggested to Lawrence in an email that the characters also reminded me of a 2000 film called “Boiler Room” about an unscrupulous bunch of young Wall Street stock brokers (starring Giovanni Ribisi and Ben Affleck), Lawrence said his fictional mortgage broker Mr. Ego had his crew of mortgage brokers watch “Boiler Room” for inspiration!
Here is Lawrence’s description of Big Mel: “Big Mel was the ultimate in macho. A baby-faced 20-year-old kid wearing fancy gold cufflinks, gaudy jewelry, expensive European suits and an expensive watch. With his slicked back hair he actually looked like a Mr. Ego clone. Ironically, Big Mel was only big in spirit, as he stood only five-and-a-half-feet tall. As stereotypical as this may seem, he actually looked like Mr. Ego’s ‘Mini Me.’”
Lawrence, defending honest mortgage brokers – yes, he actually believes there is such a breed and describes his experiences working for an honest mortgage broker – says that crooked, greedy mortgage brokers, along with many homebuilders providing their own financing, and yes, many commercial bankers – are responsible for the nearly 1 million home foreclosures each year in the U.S.
What the heck is a mortgage broker, anyway? Lawrence defines them as “An individual or firm that matches borrowers to lenders and loan programs for a fee, or anyone who acts as a go-between and gets a fee or other compensation.”
That’s the definition of any broker, whether it be for stocks or real estate. Simple enough, but the fee is the problem, in my view. A loan officer at a bank, which is where I advise people to go, is generally on salary – not subject to the high pressure “produce or be fired” atmosphere prevailing at the boiler room mortgage brokers described so vividly by Lawrence.
All too often homeowners seeking to refinance their homes and pay off student loans, credit card debt, medical bills, etc. are the proverbial lambs led to slaughter by mortgage brokers who lie, cheat and steal – all for the all important fee that leads to a six-figure annual income for men and women in their teens and 20s. Many of the people Lawrence worked with wore $800 suits, drove $100,000 Porsches and lived in dilapidated one-bedroom apartments in the “bad parts” of his Ohio city.
Lawrence describes “10-pounders” – loan fees of $10,000 – and “20-pounders” – those of $20,000 – that motivate the sweatshop operators of a largely unregulated industry. Ohio mortgage brokers ran wild until 2002, when the Ohio General Assembly enacted Senate Bill 76 that Lawrence says was supposed to “clean up” the mortgage brokers in the Buckeye State. Like a lot of legislation, the intentions were good, he writes, but the crafty brokers soon found ways to skirt the licensing and education requirements contained in Bill 76.
There’s a lot of technical material in the book about loans that even experienced loan officers have difficulty comprehending. The material is important, but I think the essential message of “Refi-Bust” is to not trust anything a broker tells you. Or maybe the old Ronald Reagan mantra, “Trust, but verify.”
I’ve always been an opponent of interest-only loans, adjustable rate mortgages (ARMs) and the bait-and-switch approach used by TV advertisers – you know the ones -- but if you must get something like this, check it out with a responsible attorney, he advises. As Lawrence says over and over again, “there are no 1 percent loans.”
My advice, based on decades of covering real estate at metropolitan newspapers and online, is not to get into a house you can’t afford, don’t rack up unsustainable credit card debt and sell the house and move into an apartment if homeownership has become too much to handle. Life is complicated enough without housing affordability worries driving you crazy.
A good, but often overlooked, source for housing finance in West Virginia is the West Virginia Housing Development Fund, www.wvhdf.com The phone number is 1-800-933-9843. I wrote about his organization, headed by Joe Hatfield, when I covered business news at the Beckley newspaper. Other states have similar bodies that provide housing finance at reasonable rates to ordinary working people who want decent, safe and sanitary housing, not starter castles to impress people they don’t even know.
The audience for Lawrence’s often entertaining book should be homeowners thinking of refinancing (be very, very careful! This is the road to perdition in too many cases); prospective homeowners tempted by absurdly low teaser payments that probably don’t include taxes or homeowner insurance and just about anyone tempted by the offers than jam everyone’s mailbox daily.
David Lawrence is an author who has over ten years experience in the mortgage business as a loan officer, manager and former owner of a prestigious mortgage company. In other words, he was in the belly of the beast for a decade!
The book is entertaining, but more important, it has information that could prevent you from making the most costly financial mistake of your life.
I recommend “Refi-Bust” without reservation. Don’t wait for the movie! I’ve cast in my mind Vin Diesel as Mr. Ego and Giovanni Ribisi (he was in the recent remake of “The Flight of the Phoenix”, playing the aircraft engineer) as Big Mel.
Author’s web site: www.RefiBust.com
The reviewer covered real estate at The Milwaukee Sentinel and the Los Angeles Times. He has been a member of the National Association of Real Estate Editors since 1971 and was president in 1984.