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That Will be $417,000 Please – You Have Three Days To Pay

money billMany real estate agents do not realize that mortgage brokers and bankers sign agreements with their wholesale lenders (B of A, Wells, etc) that if a loan goes bad because of differing reasons (fraud mostly), that the banker/broker must buy the loan back.

Imagine being at your desk and getting a certified letter in the mail that says that you owe the lender you sold the loan to $417,000 because their was fraud found on the loan.  Come up with the $417,000 in three days or else we will close you down, sue you, revoke your license and find out where your kids go to school.

How about this…  Imagine if not only the mortgage people got this letter but the real estate agents started to get the letter and needed to come up with the money if a loan went bad.

Right now, without a massive pattern of fraud that is investigated by the FBI over a long period of time are real estate people held responsible.

It’s like a coach getting fired for his team being bad and the players keep getting paid millions (see the National Basketball Association) for years to come.

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OK, fellow agents, how about it?  Willing to share the pain?

Written By

Realty Reality! That describes Fred, a sharp witted and outspoken realist for the mortgage and real estate world who has appeared on CNBC and NPR's Marketplace along with being quoted in the New York Times, The Wall Street Journal and other media outlets. Fred is the CEO of U S Spaces, Inc/Arrivva (a real estate brokerage firm in PA, NJ, DE and CA) and U S Loans Mortgage Inc (mortgage brokerage in PA, CA, FL and VA), and serves on the Board of Directors and is the Federal Legislative Director for the UpFront Mortgage Brokers. Fred is also the co-creator of real estate startup Rentscoper.com, a mathematically driven rental search engine. See everything Fred at fredglick.com.

21 Comments

21 Comments

  1. Ross Therrien, Prudential Verani

    February 23, 2010 at 9:42 am

    Inflated income was a problem in New Hampshire back in the early 90’s and the lenders–ComFed, the Realtor and the developer all got nailed. Lender and agents went to jail, the developer got away with it but his attorney went to jail. My license is not worth any buyer or sellers persuit of the big American dream.

  2. John Kalinowski

    February 23, 2010 at 10:16 am

    If the real estate agent is a partner to the fraud, then yes, they should be somehow held responsible. Otherwise, why would they if they had nothing to do with qualifying the loan and did not commit fraud?

  3. Fred Glick

    February 23, 2010 at 10:58 am

    How about if a real estate agent manipulates a buyer into purchasing a home even without a loan?

    That’s one of the point I am trying to make.

  4. Dennis C Smith

    February 23, 2010 at 2:46 pm

    I lost a lot of business in 2005-7 because agents calling for me to pre-qual clients who could not afford the houses they wanted to buy and I told them so. I would follow up with the agents a bit later and they would say, “oh Fred bought that place, another broker did the deal.” They knew they guy was not qualified, I told them so. Many of them are not in the business any more, some still are and if they call I don’t work with them–they were willing to jeopardize my license and my company for their commission. When I did not go along they found another broker to do the deal, and stopped referring any clients as well since I wouldn’t play ball.

    Real estate agents have missed a lot of the blame and negative associations that have accrued to mortgage brokers and lenders. Ninety percent of homebuyers contact a real estate agent before they contact a lender, and most of them then contact the lender the real estate agent recommends. As you say they got paid and their level of risk on the deals is just about zero, not only financially but in the coin of public relations as well.

    Thank goodness the market has taken most (many?) of the bad ones out of the industry.

  5. Fred Glick

    February 23, 2010 at 3:08 pm

    @Dennis. Great points!

  6. John Kalinowski

    February 23, 2010 at 5:12 pm

    @Fred – You wrote: “How about if a real estate agent manipulates a buyer into purchasing a home even without a loan?” What does that mean, and how does it pertain to the article your wrote above?

    @Dennis – Why is it the real estate agent’s job or responsibility to determine how much risk a lender is willing to take? If one lender states that a buyer is not qualified, isn’t that based on their own underwriting guidelines and their investor’s risk/reward profile? If one lender is not willing to do a deal because a buyer is not qualified per their standards, it doesn’t mean there aren’t lenders/investors out there who use different metrics for risk tolerance.

    If one lender says no, it doesn’t make the agent evil, immoral, unethical, or criminal if they then find another lender who is willing to do the deal.

    Isn’t it ultimately the lender’s responsibility to determine how much risk they are willing to take? It’s not up to the agent to make that determination, nor is it their responsibility if the lender makes a bad decision or has a lending profile that’s too risky. Just sounds like sour grapes to me.

  7. Fred Glick

    February 23, 2010 at 5:33 pm

    John- it’s called a cash deal! What if the real estate agent lied to a buyer to sell them a house.

    Shouldn’t they pay the commission back?

  8. Ken Montville

    February 23, 2010 at 5:38 pm

    I have to go with John K on this one. It’s one thing to collude to commit fraud. It’s another to find a lender that can get things done for highly motivated buyers.. Even in today’s environment there are lenders that will only touch A+ paper and others that will assume more risk. Sure. It would be great to only work with the creme de la creme and be able to make a great income. Where do I sign up?

  9. John Kalinowski

    February 23, 2010 at 5:41 pm

    Fred – That’s so vague and non-specific, how can it even be answered? Of course if someone is guilty of fraud or misrepresentation they should be held responsible, both criminally and financially. That’s what our court system is for, and why would anyone argue otherwise.

    Again, how does an agent lying to a buyer in a cash deal have anything to do with the article you wrote above, which discusses mortgage brokers committing fraud. Your article’s basis was that real estate agents should be held responsible for coming up with the money “if a loan went bad”. Loans go bad for lots of reasons, most of which have nothing to do with fraud. Why in the world would the agent have to come up with the money unless they were guilty of breaking the law?

    I guess I just don’t understand the point you’re trying to make. If someone breaks the law, then yes of course they should be punished whether they are a real estate agent or a mortgage broker or a candlestick maker.

  10. aMY L cavENDER

    February 23, 2010 at 5:43 pm

    Good post. I too lost a bit of business between 2005-2007 because I wouldn’t do 100%, no doc loans. Guess where most of those loans are now? That’s why I get to explain to people now that I need to look at credit, income, assets, dna, first born, color of their urine. Then my processor will want to know what type of car they drive, political affiliation. Then the underwriter will look for their elementary through college gpa, how many times you’ve been sick in the last year and if you keep your house clean.

  11. Dennis C Smith

    February 24, 2010 at 1:56 pm

    @John: There may not be a legal obligation for the agent to determine if their client can qualify to purchase the property or not, though steering them to lenders who will make sure they qualify may be borderline–I’m not a lawyer. But what about the ethical obligation to represent your client and their obtaining homeownership, not just for a little while but to be homeowners for the long term absent other forces such as job loss, illness or death that impact household income? Much of the discourse the past several years has been acrimonious in nature and directed at me and my profession. A writer for the OC Register regular posts my weekly blog “Question of the Week” and over the years I have been called scum, dirtbag, greedy-whore, etc just because I am a mortgage broker.

    The vast bulk of criticism for failing loans falls on the lending side of the real estate industry, where certainly a fair amount of criticism is due. The relative lack of criticism however, directed to agents who abetted putting families into homes they could not afford does not reflect the role many, many agents played in the process.

    And don’t get me started on homebuilders who own(ed) their own brokerages, etc…..

    I appreciate your comments John, but sometimes just following the law is not good enough.

  12. Fred Glick

    February 24, 2010 at 2:32 pm

    @Dennis. I am sure the word CONSPIRACY could be used in some real estate transaction. 🙂

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