From the middle of the year last year, when the big money-center banks started to lose their ability to sell mortgages onto the secondary market, their rates all of a sudden became not so competitive. … Today, the banks that are the most aggressive price-wise are these smaller thrifts, the savings and loans, who don’t have big TV campaigns, and where you probably don’t do your banking.
In the late ’90s, Wall Street made it easier for buyers to get home loans, and the mortgage business evolved from small and local to a big global investment game. How did your business, which had already been around for long before, change then?
No, I think things began to change with mortgages in the ’80s, actually. … I actually went out and went to the banks, and in many ways I helped change the mortgage industry, in the sense that I we
nt to Chemical at that time, and Chase and the different lenders, and said, ‘Why not let me make loans and have you pay me a fee, and I will do all the processing work?’
Last month, New York’s attorney general announced that mortgage brokers essentially can no longer pick real estate appraisers for their deals, which is what you and the industry have always done.
We actually don’t pick the appraisers. Every bank has its own set of approved appraisers.
But you pick one from that list.
Correct.
And that’s been a problem, because you tell the appraisers the number you’re expecting in order for your client’s mortgage to work (banks will only lend a percentage of an apartment’s appraised value), which has put pressure on appraisers. So will the new system create more integrity?
No. I think that having a bank call the appraiser to order the appraisal versus a mortgage broker making the call doesn’t really change the system. We don’t compel our appraisers to come in at a certain value, and not every appraisal works, and such is life … and I’m not completely confident that his mandate will go through because it’s damaging to the consumer.
How would it be damaging?
If I’m buying and I go to Bank A, and Bank A orders the appraisal, but then, a month later, Bank B has a better rate, then I’d have to pay for a second appraisal.
Mortgage brokers basically can no longer be affiliated with appraisers. But, for example, the appraisal firm Vanderbilt used to have you on its affiliations Web page.
We were never affiliated—we were just doing it for marketing. I have no affiliation with any appraisal company.
You and Vanderbilt were both subpoenaed. What did Attorney General Andrew Cuomo ask you?
I didn’t actually meet with Cuomo, I met with a couple of the attorneys and they just asked me some questions. It wasn’t a subpoena, I was actually asked to come in and have an informal conversation, which I did.
So what are the systemic problems with the mortgage industry?
I think that my industry has gone for too many years being unregulated, unlicensed, improperly educated. Finally, thanks to the subprime crisis, New York State and nationally, each individual mortgage broker is going to have to be licensed, and there will be background checks.
Do you see bad mortgage brokers in New York?
Absolutely, there are unscrupulous people in every industry—the mortgage brokers that pushed the subprime business, the mortgage brokers that would compel a buyer to overstate their income. It happens everywhere in the country. I’ve seen people falsify documents, pay stubs, tax returns.
Do they get caught?
Anyone that I’ve caught I’ve fired.
Is there going to be more regulation?
Up until this year, the only person in my entire company of 150 people that was required to be licensed was me personally. So now each of my individual brokers are going to have to have to have their fingerprints taken. They’re going to have to have a background check. They’re going to have to take continuing education.
You and your old mortgage broker Jeff Appel are like the real estate agents Dolly Lenz and Michael Shvo—Mr. Appel worked for you and was very successful, but then he left. When you were at the top, he was around No. 8 …
He was not No. 8, no. [Editor’s Note: He was No. 11.]
He left for a rival mortgage broker in 2005. Do you still speak to him?
I speak to him when I see him at events.
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