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What Happened To Ethics?

A disturbing trend of disappearing values

Lew Sichelman headshot
Lew Sichelman
What happened to ethics?

Years ago, I attended a session on ethics at a National Association of Realtors convention. It was eye-opening.

The audience filled the room, which in and of itself was surprising, being that real estate agents have a terrible reputation. This is despite the fact that I truly believe most are hard-working souls trying to do right by their clients.

That aside, when the speaker asked how many had seen another agent violate NAR’s highly touted Code of Ethics, every hand shot up. Every one! But when they were asked if they had ever violated the code, nothing. Not one hand was raised. Not one!

I bring this up now because there seems to be something of a trend in the housing sector where companies and/or their leaders or employees are allegedly violating the rules, not to mention perhaps the law. Where are these people’s scruples?

Recently, for example, four women from the eXp Realty in California have charged two men with drugging them and then sexually assaulting them while at industry and company conferences. One of the men is a former eXp agent; the other still hangs his license there.

According to the complaint, the two alleged miscreants participated in an “ongoing venture to entice women to travel in interstate commerce, recruit enthusiastic real estate agents with the promise of career advancement and coaching, and use their considerable influence in the real estate industry on these other real estate agents(‘) behalf, knowing that they would use means of force, fraud, or coercion to cause these women to engage in a sex act.”

What Did Leaders Know?

The complaint describes in fairly graphic detail — I won’t bore you with the specifics — several incidents in which the plaintiffs maintain they were drugged, then woke up naked in bed with one of the defendants. Worse, they charge that when they brought the incidents to the attention of eXp’s founder and its former CEO, the company leader did nothing about it.

Specifically, the complaint accuses both company leaders of knowing about a “pattern and practice of predatory sexual conduct” by the two defendants but not doing anything to help the woman. If true, has this company no moral compass?

Next, I give you Celebrity Home Loans, which stands accused of laying off more than 90% of its employees just three days before they expected to be paid. Even Silicon Valley Bank paid its workers their annual bonuses — bonuses they earned in 2022 — just hours before the financial institution collapsed.

Yes, the timing of the bank’s incentives seems a tad shady, especially since the officers had to know they were on the brink of failure. But they weren’t paid to just the top guys. They were paid to everyone. Also, according to news reports, bonuses have always been awarded on the same day every year, and the payments had been in the works for days.

And yes, there does seem to be some shadier — more shady? — dealings among leadership. Reportedly, several officers sold stock they owned in the bank to SVR’s parent company, pocketing millions for themselves, just before the bank went under.

Pay Withheld

But Celebrity, if the suit proves true, denied employees timely compensation for the pay period immediately prior to their termination. “For many,” the suit alleges, “the outstanding pay included salaries, wages, and commission earned during the entire month of January and the first half of February.” According to the lead plaintiff, they weren’t paid for accrued paid time off and vacations, either.

Disturbing trend of disappearing values

Come on, guys. These are the people who brung you there. Where’s your sense of right and wrong? At least Homespire Mortgage has agreed to pay 12 former loan officers the full amount they were due for working overtime and off the clock. It took a lawsuit to get Homespire to step up, but it finally did.

Citing violations of the Federal Fair Labor Standards Act, the Homespire suit sought to recover unpaid overtime, minimum wages, and commissions as well as attorneys fees and court costs. According to the suit, the plaintiffs were individually owed between $9,500 and $42,960, including both total wages owed and liquidated damages. The loan officers were said to be compensated through a baseline hourly wage plus commissions on loans they closed. The amount of the commissions depended on a number of factors, such as the number of loans closed, loan size, and the loans’ interest rates.


And then there’s the less-than-ethical practice of pouching the other guy’s employees. Here, PrimeLending is suing First Community Mortgage for raiding 100 of its employees last September, stripping it of about 10 percent of its workforce and $30 million in annual revenue. And earlier last year, LoanDepot sued CrossCountry Mortgage for purportedly poaching at least 32 of its New York employees, taking with them thousands of confidential documents.

Actually, CrossCountry also has been accused by two other lenders, Guild Mortgage and Caliber Home Loans, of raiding their workforces. In Caliber’s case, the company alleges that CrossCountry snatched more than 80 employees who were responsible for more than $2.3 billion in annual originations.

“We see cases like this all too frequently,” says mortgage banking consultant Joe Garrett of Garrett, McCauley & Co. “So here’s our advice: Anytime you’re thinking of hiring more than two or three employees from a competitor, talk to your attorney first to make certain you do it in a way that will avoid a lawsuit.”

And how about junk fees? Call them legit if you want, but to me, it’s out-and-out thievery. And the Consumer Financial Protection Bureau agrees. In March, the watchdog agency identified them as “illegal fees old and new ways that mortgage servicers attempt to run up” the tariff on homeowners.

Among the controversial fees: Charging the maximum late fee allowed by relevant state laws, even when owners’ mortgage contracts capped late fee amounts below state maximums. Charging for property inspection fees for every visit even after addresses were known to be incorrect. Charging for mortgage insurance premiums that were not owed. Failing to waive late fees for borrowers entering certain loss mitigation options that precluded late fees from being charged while in forbearance.

And that’s not all! Last year, the CFPB reported finding servicers that charged borrowers who paid by phone “sizable” fees, even though consumers were not made aware of the pay-by-phone penalties. Have these robbers no consciences?

Preying on the Military

I could go on and on. A Calfornia lender shut down by the CFPB for repeatedly advertising to military families — our soldiers and sailors — that illegally indicated it was affiliated with the U.S. government. A Florida-based loan officer accused of concocting child support documents for kids that didn’t exist, creating fake income statements and forging judges’ signatures in order to qualify borrowers for financing for which they didn’t otherwise qualify. A large national bank accused of welching on its commitment to increase its lending in low and moderate income communities.

Thankfully, there’s some justice in this hocus-pocus, switcheroo world. To wit, the California couple who sued an appraiser of undervaluing their property because they were Black. The appraiser valued their place at $998,000. But with a White friend posing as the owner, a second appraisal came in at $1.48 million.

The parties have since settled out of court for an unspecified amount. But the deal comes with a unique and justifiable caveat: The defendant and others who work for her company were compelled to watch a documentary about appraisal bias and featured the plaintiff’s experiences. That film, “Our America: Lowballed,” was produced by ABC News.

And speaking of Justice, four realty firms have now settled with New York Attorney General Letitia James in the infamous Long Island case in which agents were found to be steering Black clients away from White neighborhoods. Said James, “Discriminating against people because of race is not just shameful — it is illegal. Housing is and always will be a human right, and my office will continue to address these pervasive and discriminatory practices statewide.”


This article was originally published in the NMP Magazine May 2023 issue.
Lew Sichelman headshot
Lew Sichelman,
National Mortgage Professional Contributing Writer

Lew Sichelman has been covering the housing and mortgage sectors for 52 years. His syndicated column appears in major newspapers throughout the country. He also has been the real estate editor at two major Washington, D.C., dailies and spent 30 years on the staff of National Mortgage News, formerly National Thrift News.

Published on
Apr 25, 2023
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