Of Donkeys and DecencyChris Sanderintegrity, mortgage originators, fraud and deception, Code of Ethics
There's been a joke going around lately that Id like to share
with you: It seems that, upon moving to the country, a city boy
purchased a donkey from a farmer for $100. The farmer agreed to
deliver the donkey the following day, but when he arrived, he
brought unfortunate newsthe donkey had died.
When the boy asked for his money back, the farmer replied, I
cant. Ive already spent it. "Well, then at least give me the
donkey," the boy retorted.
"What are you going to do with it?"
The boy replied, "I'm going to raffle it off. I just won't tell
anybody that it's dead." A month later, the farmer once again met
up with the boy and inquired about the donkey. "I raffled him off,
the boy told him. I sold 500 tickets at $2 apiece and made a profit
of $898."
"Did anyone complain?" asked the farmer.
"Just the guy who won, the boy said, smugly. So I returned his
money."
That little boy grew up to be the chairman of Enron.
You have to admit, it's a funny joke. Or is it?
Over the past several years, I've seen many mortgage loans and
schemes that are as strange and fraudulent as the dead donkey
raffle. And we wonder why government involvement is becoming more
prevalent.
The solution to this problem seems simple: Integrity.
Unfortunately, however, some mortgage originators lack this
characteristic, which is desperately needed within our industry
today. I realize that may sound like gnarled fingernails running
down a chalkboard, but consider that most peopleeither first-hand
or through a friend or relativehave been victims of mortgage fraud.
Also, consider that six of the 10 largest corporate bankruptcies in
history have occurred within the past year, all involving fraud and
deception of their clients. Does this sound like a coincidence? We
must change how we conduct our business right now if we are going
to survive.
The principal is pretty basic. Deliver what is promised, period.
If you tell a borrower that their rate will be "A," then deliver an
"A" rateno matter what! It's the right thing to do!
Think back to the last loan you wrote, and answer the following
questions honestly:
*When you took the application, did you apply the rate based on
the lowest monthly payment for the borrower, or was it based upon
yield spread?
*Did you then figure what you could charge the borrower in order to
make up for any shortage this may have cost you?
If you answered "yes" to either of these questions, you may need
to reevaluate your priorities. Now don't get me wrong, anything
worth doing is worth doing for a profit. But there's a fine line
between making a profit and gouging someone. All I am suggesting
is, the next time you sit down to take an application, ask
yourself, "Am I doing the right thing, or am I selling a dead
donkey?"
Chris Sander is Vice President of Missouri Association of
Mortgage Brokers and an executive officer at IMS Mortgage Services
LLC. He may be reached by phone at (314) 984-2520 or e-mail
[email protected].
