The rise and fall of the brokerBrian Kossmortgage brokering, small entrepreneurs, real estate, refinance
It is frequently said in America that we have a collective short
memory when it comes to history. It is said that we will jump on
the bandwagon of whatever the newly appointed star or savior is and
ruthlessly forsake yesterday's star or savior with great passion.
You see us do it with stars in sports and entertainment. You see us
do it with successful businesses and their CEOs who were anointed
into superstar status. We love to see people become a success. It
validates for us that it can happen to anyone, maybe even us. But
the tides always turn, and we are compelled to tear those down whom
we have heralded.
Watching Roger Clemens self-implode—as clearly the most
dominant pitcher of an era, maybe one of the greatest of all time
and a shoe-in for the Hall of Fame—reminds me a bit of the
press and public tearing down the giants of our industry. Stock
brokers in the late '90s rode a path of fame and fortune, and we
loved them, only to see the industry shredded after the bust. And
so is the rise and decline of the famed Mortgage Broker—once
a hero and friend, the industry now shares the spotlight of the
fallen. But as with history, when things settle, the craft will
return to its day of favor and respect.
Mortgage brokering is an industry of small entrepreneurs who are
helping friends and family live the American dream of owning real
estate. For decades, brokers have filled the voids left by banks by
bringing the money to the people. In the past, if a person wanted
to buy a home, they went to a bank during the banker's hours and
sat in a lobby hoping to see the vice president of lending. If they
weren't there, they were sent away and told to come back after
making an appointment, or they were told to come back after they
found a house so the bank could work with real figures. The
potential buyer then would spend months looking at homes, fall in
love with a home, make an offer, get it accepted and then proceed
to the bank with much excitement. The banker would then tell that
person they couldn't afford their home due to their credit history,
tax returns or lack of downpayment.
Brokers became the advocate for these buyers by opening up the
closed society of banking to the public. Brokers met with the
buyers after banker's hours. They talked in common vernacular,
explaining how to work the system to fit their situation. Brokers
had the brilliant idea to figure out how much buyers could afford
to pay before they would go out looking for a home. Brokers decided
to save everyone the time and embarrassment and review credit
reports, income and assets before a real estate agent or builder
wasted any time with a potential customer. This proactive,
deal-making attitude endeared local brokers to their local real
estate agent/builder partners. Brokers brought a value to all; the
customer had an advocate putting them into the home of their dreams
in a way a banker couldn't, and in the end, the banker/investor got
an asset for their books with no hassle.
As the real estate market boomed, our membership soared. Many
new folks came into the industry without the understanding of the
broker's role of advocate and the cruel cyclicality of our
business. When the refinance booms hit, the growth of brokers and
volumes of loans were exponential. Everyone knew a few Mortgage
Brokers in their personal circle, and they were amazed at their
success. Too many brokers were living large off their new found
success in an ostentatious way that offended the common man. The
expensive sports cars, bling, trophy homes, loud dinners, big
vacations and strip club outings all found their way into the
papers and cocktail party circuit. So when sub-prime began to
crack, the rabid public had their opening to begin tearing.
One of the great shames in this "mortgage meltdown" is the
bringing down of Angelo Mozillo. Yes, I said it; he has become the
poster child for the excesses of our industry. Why? Maybe it was
because of his constant presence in the media over the last 20
years? Sure, he had the limelight, but he deserved it. He built the
strongest, independent mortgage banker that could take on the
banks. Plus, he had the chutzpah to say what we were all thinking.
As sales people, we admired that audacity. Angelo called the
bankers on the carpet for not doing enough to help the underserved
enjoy the privilege of homeownership. He stood in front of the American Bankers Associations
Community of Bankers Conference and said: "We have some of the
greatest 17th century minds in this room." Needless to say, many
bankers were happy to see him go down and didn't lend a hand when
Countrywide (CW) was bleeding.
Angelo was competing with these same bankers in the early '90s,
by doing all the deals the bankers were too lazy to do. CW was
doing primarily Federal Housing
Administration, U.S. Department of
Veterans Affairs and state bond loans when there was little
Wall Street creativity because the banks wouldn't touch them. The
banks hated dealing with the mind-numbing paperwork of government
loans, but these programs existed to help the common man get into a
home, and CW was their advocate to navigate the process. During
these years, Angelo wasn't drawing down the big income. He was
building equity in his company that he could cash in later. Like
Clemens, earning a total of $1.1 million in his first three seasons
in baseball (years when he set records and earned Most Valuable
Player honors), Angelo reinvested in his business and kept his nose
to the grindstone.
Now, we don't remember a butcher's son from the Bronx who
started in the mortgage business at 17 and grew the most successful
lender of all time. A company that grew so large that it was able
to grow a top 20 bank from scratch. A man who was recognized for
these achievements by the Horatio Alger Award. We remember the
perfect tan, the sharp suits and the country club memberships,
overlaid with a swagger and confidence bordering on arrogance. It
is a shame to only see Angelo and CW as poster children for what
went wrong when they did so much right, especially for our
industry.
Before our memory fades, we need to see how a scrappy kid from
the Bronx assembled other scrappy, hungry kids from state colleges
and built a great company doing all the things that those blessed
with better educations and family bank accounts didn't want to do.
As the banks now become filled with confidence, the solid brokers
remaining need to remember Angelo's lessons and find those areas
where banks' arrogance prevents them from succeeding and fill that
need.
Brian Koss is the executive vice president of the Mortgage Network in
Westford, Mass. He may be reached at (978) 399-1300 or e-mail
[email protected].
