Throughout history, there have been two types of people in spheres of leadership: Those who have actually been great leaders and those who have wished to merely be seen as great leaders. These two types of people reflect the positive and negative sides of human nature. There is the more positive side of us that wants to truly make a difference in the world … and then there is that darker side that only wants the credit for making a difference without having to do the work.
We see it in our athletics. The recent “doping” scandal with Lance Armstrong has opened up the question of the incentives professional athletes across all sports face in competition. And we have seen it for years in business, most notably with the inflated financial picture presented to the world by Enron. We see it everywhere: Politics, scientific research, religion, education, you name it. In every space, there are people at the top looking for shortcuts to fame and notoriety. Fraud, if you can get away with it, is a much less costly means to an end. You don’t have to do the work; you just have to reap the rewards. And then you can bask in the light of being the great leader everyone thinks you are.
I heard a preacher once say, “Sin will take you further than you are willing to go and cost you more than you are willing to pay.” The same can be said of fraudulent behavior in leadership. Fraud will take you further than you are willing to go and cost you more than you’re willing to pay. Ethical ramifications aside, it is rarely in a person’s best interest to use fraud as a means to gaining an edge. More often than not, you will be found out.
Before you start high-fiving me and shaming all of those evil leaders giving decent folks a bad name, consider this. Fraud doesn’t always originate from evil intentions of bad people. Sometimes, it can come from good intentions of good people. I was blown away by a report came out last December indicating a recent spike in mortgage fraud. My view was that fraud was on the decline in the industry. Regulation is at all-time highs as are the penalties and the incentives simply aren’t there for people to engage in fraudulent behaviors. Or so I thought …
Several weeks ago, I had the opportunity to interview on my radio program, “Lykken on Lending,” a man named Mike who had gone to prison for mortgage fraud. Mike was apologetic for his behavior and took complete responsibility for the time he had served. However, he revealed a common misconception that is infinitely important for mortgage professionals to understand. Many people falsely assume that the people who get in trouble for mortgage fraud are generally schemers will evil attentions to scam and weasel their way into success. Mike’s story reveals something different.
Mike was in a crunch to pay off some business expenses and decided, one day, to borrow $5,300 from an escrow account—with every intention of paying it back the following week. Well, the next week came around and he found himself in the same position. That one choice started a seven-year downward spiral that eventually led to a $6.7 million decline in his escrow account, negatively affecting 43 families. “I chose one day to do what was easy instead of doing what was right,” Mike says. It starts small. It starts innocently. One bad decision is all that it takes.
Mike says that the worst part is “Knowing what you’ve done to the people you respect. And you can’t get it back. Once you do it, you can’t get it back.” Even after getting out of prison, Mike will be dealing with the consequences for the rest of his life. He has lost all of his money. But he says the more important losses are his relationships. He lost a twenty-three year marriage. He lost the trust of his family and the respect of his professional connections. “The stigma doesn’t go away,” he says. Mike will be dealing with the financial and emotional consequences of his fraud for the rest of his life. It just isn’t worth the shortcut. “It’s not if you get caught,” says Mike, “it’s when you get caught.”
It is so easy to start down the slippery slope. There are good people on the fringe, making some occasional bad decisions. What amazes me is how easily and innocently mortgage professionals can get pressured into committing fraud. It can be just a little white lie to help someone get a loan. It can be failure to verify employment up until the day of closing. It can be an infinite amount of well-intentioned oversights that can turn into fraud. It isn’t just the bad people; it can happen to anyone.
When Lance Armstrong finally came forward and admitted to using performance-enhancing drugs, he said, “I view this situation as one big lie.” It started small but, the more he had to cover his tracks, the bigger the lie became. As my interview with Mike on my radio program has revealed, that’s the same thing that happens in mortgage fraud. It starts with one mistake and every subsequent mistake is merely an attempt to cover up the damage of the first one.
So, as leaders in the mortgage industry, how do we get around this danger of falling into the fraud trap? Well, I can only see one way: never, ever, take the shortcut and listen to that inner voice our conscience. Great leaders stay true to the inner voice and are able to see a clear connection between high-grade integrity and strong work ethic. The only way to get ahead and come out a winner is by taking the high road. Great leaders never try to get around hardships; they plow through them. The only way to enjoy the spoils of victory is to earn them. It comes down to CHARACTER. (I recommend you go back and read a series of articles I published in this magazine last year and the year before titled “The 7-C’s of Leadership”. Character was #1!
Author Steven Pressfield, in his motivational book Do the Work, talks about what he calls “the resistance.” According to Pressfield, there is an underlying force working against all of us to prevent us from getting meaningful work done. It causes us to stall and to make up excuses as to why we can’t just do the work. The same malignant force works within us to take the low road and find an easy way out of a hard situation. Almost always, that leads to poor ethical choices.
What is “Fraud?” Merriam-Webster defines it as, “the intentional perversion of truth in order to induce another to part with something of value or to surrender a legal right.” In laymen’s terms, it’s akin to the philosophy, “the end will justify the means.” It’s okay to lie, it’s okay to cheat, as long as I get what I want in the end. We may not outright say that this is what we are thinking but, when we take shortcuts to get what we want, that is undoubtedly what is going on subconsciously.
Great leaders in the mortgage industry must practice constant vigilance in the ethics of how business is being conducted in their organizations. Because of how easily and innocently fraudulent behavior can begin, leaders must catch it before it spirals out of control. If leaders don’t create a culture of high ethical standards, employees can fall into a culture of dangerous incentives. If one loan originator begins to cut corners and, in doing so, generates better results, leaders may reward that officer for the results. When other originators see how successful that originator is becoming through taking shortcuts, they may begin to alter their ethical standards in order to compete. Before you know it, you will have an entire office of people cutting corners to get ahead. Successful leaders in the mortgage industry will have a “the buck stops here” mentality. All “good results” will be funneled through a measurement of how those results are obtained. For great leaders, ethics come first and results come second. Because, without ethical underpinnings, “results” aren’t really results … they’re scams.
The bottom line is this: Every day when you get up in the morning and get ready to go into work, you need to make up your mind as to what kind of leader you want to be. Do you want to be a real leader … or just a perceived leader? Do you want to actually win … or do you just want to bask in the glory of the victory? The world is in dire need of genuine leaders. We need people who are willing to take the high road to success … and inspire others to do the same.
The mortgage industry needs such leaders perhaps more so than any other. The temptation is ever before us. I’ll conclude with one last piece of advice from Mike, the gentleman whose story is the basis of this article. “We need to accept,” he says, “that there are opportunities for fraud in a lot of different places. For anyone to say that ‘it would never happen to me’ or ‘I would never do it,’ well, you’re either going to get the money on escrow, or you’re not going to make payroll and you’re going to end your business. The temptation is there and we need to be aware of it.”
David Lykken is president of mortgage strategies and managing partner with Mortgage Banking Solutions. He has more than 35 years of industry experience and has garnered a national reputation, and has become a frequent guest on FOX Business News with Neil Cavuto, Stuart Varney, Liz Claman and Dave Asman with additional guest appearances on the CBS Evening News, Bloomberg TV and radio. He may be reached by phone at (512) 977-9900, ext. 10, or e-mail
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