| Things
Aren’t Always What They Appear to Be
I'm sure many of you watched the Super Bowl and
enjoyed Paul McCartney during halftime. That show
was sponsored by Ameriquest Mortgage, a company
specializing in loans to borrowers with less-than-perfect
credit.
The Ameriquest-sponsored halftime show
and the company's commercials during the game were
certainly a vivid contrast from this headline in
the Los Angeles Times two days before: "Workers
Say Lender Ran 'Boiler Rooms' "
Quoting from the Times' sub-headline: "Critics
say Ameriquest, touted as an industry model, fabricated
data, forged documents and hid fees. The company
denies wrongdoing."
The whole
article is available at the following website:
http://www.latimes.com/news/printedition/la-fi-ameriquest4feb04,1,6250465.story
I should point out here that I have no personal
knowledge about Ameriquest or its business practices.
But because much of the Times' information was gathered
not from disgruntled borrowers, but from former
employees, some may conclude there is real substance
to the allegations. Regulators will certainly have
a lot of work sorting all that out. Stay tuned.
What I do believe is that the alleged
borrower abuse outlined in the Times' article does
not differ greatly from practices that many observers
believe are common in the mortgage industry. Because
of widespread borrower abuse, a continuing theme
in the more than 100 columns I have written over
the past few years is counseling people about how
best to look out for themselves, how to do their
homework so as to avoid traps and losing money.
My point here is that having a glitzy
public face may totally mask what may be going on
behind the scenes. There can be a fine line between
salesmanship and counseling. I'm afraid that sometimes,
industry wide, many loan officers are just smooth-talking
salesmen who are trained to dazzle their customers
into doing business. In many cases, uneducated borrowers
do not even know they have been abused because they
don't get accurate information up front and frequently
are so harried when signing documents, they do not
read all of them, to their peril.
By comparison, you probably can do a lot
better with a loan officer with great math skills
and an ability to explain things, even if it meant
dealing with someone with underdeveloped people
skills.
In general, dazzling sales pitches are often
designed to keep your eyes off what is important.
I have heard some pretty frightening stories from
people who describe their last encounter with the
mortgage industry. It's a lot like reading in the
newspaper about elderly people having been conned
out of their life savings. There is a common theme
you hear: "He looked like such a nice young
man."
Of course, he looked good! How far could
he have gotten looking like a homeless person? People
frequently rely upon their first impressions about
sales types, but after a while smart people realize
that all sales people look pretty good. But if all
look good, but some really aren't good, you'd have
to conclude that you can't rely upon appearance
in selecting someone to work with.
Similarly, the fact that a company might
spend millions of dollars in advertising to impress
you means nothing when considering how that company
might treat you if you become a customer. You might
arrive at this conclusion: "The only reason
they are able to pay for those expensive commercials
is that they have a lot of money. Where did they
get all that money?"
The answer is they got it from previous customers,
many of whom may be thinking: "I wish I had
negotiated a more savvy deal rather than helping
pay for the advertising."
I am enough of a cynic about skullduggery lending
practices that I believe their purpose in ensnaring
customers is not to give them "market-rate"
deals but to instead make what might be considered
obscene profits.
Do
your homework and be really careful out there!
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