We live in a great big country. I grew up in Ossining, NY about a half hour north of New York City. My parents were both born in Harlem and grew up in Yonkers. So you can imagine the culture shock I had in 1993 when I lived in New Orleans. Strangers actually talked to each other in the elevator. That isn't weird in New York, it is insanity. But, when in Rome...
You just don't know what they are doing elsewhere in this country. That goes for the good, the bad, and the ugly. And just because it doesn't get reported in your newspaper doesn't make it untrue.
Lenn Harley's post, I DO NOT BELIEVE THAT LOAN OFFICERS HAVE TO BRIBE REAL ESTATE AGENTS FOR REFERRALS. takes issue with Bilal Qizilbash's postingabout some agents who demanded kickbacks in exchange for mortgage referrals. To be fair to Lenn, her disagreement is that it is systemic. I don't think it is nationally, but all real estate is local. The comment stream on both postings is unkind. There seem to be 3 basic responses:
- I've been in real estate for XX years and I've never seen this sort of thing. So you must be wrong.
- I've read the posting or Bilal's Active Rain profile and he's contradicting himself because he's offering to help Realtors with their marketing. He's breaking the rules himself.
- If this were true, we'd hear about it. Or, if this were true, you should report these people to the authorities.
I am moved to address these responses because I had a different take:
4. I am not offended by Mr. Qizilbash's post because I find it factually accurate based on my own experience. Mr. Qizilbash is correct. There are bad people in our industry. He didn't say it delicately, but there are.
I'll adress each of the three general sentiments. I do this knowing that they come from people on Active Rain that I read, respect, and like. But I disagree in this case.
"I've never seen this, so you are wrong"
In 1998, I was a real estate agent in Rochester and I was dating a loan officer. I referred a borrower to her, and she thought that she'd make a better girlfriend if she asked me how many points I wanted. It took me about 15 minutes to grasp that she was offering me a kickback. The romance didn't last. I never had another incident like that in Rochester. It is not a systemic problem there.
After I married my wife in 2001 I became a loan officer full time myself with a firm in the Bronx. The kickback culture and overall corruption did not exist at my firm, but I had a front row seat to some horrific ethics and their consequences:
- I invested 6 months in helping a woman repair her credit so she could buy a co op. She didn't call me Phil; I was Felipe. After we got her approval, she called me and said that the listing agent told her if she did not use his lender that she couldn't buy the apartment. It was an illegal tie-in, but how could I prove it? She was too frightened to name names. She used the other lender because she wanted the apartment.
- A man applied to refinance his home with us. He had a social security number, a credit rating, and, obviously, the house and mortgage. But he was an illegal alien. It was all fraud. And he was furious with me for not affording him the same courtesy as his old agent and loan officer and supply him with the needed identification to get his loan approved. There was no way I could find out who the slimeballs were who committed the fraud with him in the name of a commission. He sure wasn't telling.
- Some of the largest real estate firms in the Bronx were not board members or MLS participants in the eary 2000s. That way, they didn't have to cooperate. The market was too hot for them to need other companies anyway. On a number of occasions I called on a "For Sale" sign and the listing agent would brazenly tell me that they weren't allowing other brokers to show it unless it was unsold after 30 days. You couldn't report them to the board. They weren't in the board.
- Kickbacks were either subtly hinted at or brazenly spoken of as casually as a phone call return policy. And proving that to the authorities was a lost cause without a consumer who was hurt, could prove they were hurt, and were willing to testify. Moreover, I was told a number of times that a buyer or borrower's unwillingness to complain was "cultural."
- A group of half a dozen loan officers joined the company late in my tenure there, about the time I started my company. They did gigantic business, and were praised for their repeat borrower's loyalty. Upon further examination, they were churning. They exploited the greed of the borrowers and refinanced them with 2/28's every 12-24 months whether their FICOs were 550 or 750. I didn't have access to their files. I couldn't document what I knew.
- If a real estate agent asked for a kickback, you either acquiesced or didn't get the business. I didn't get the business. But don't you dare scold me for not reporting them. It did no good. My word against theirs + no hurt consumer willing to talk+ no board membership= no recourse. Albany's focus in 2002-2005 was equal housing and conformity to community reinvestment. They didn't care if I couldn't get a broker to refer his borrowers to me.
My company is located in central Westchester County. I do business in Westchester, Rockland, Dutchess, and even Fairfield County (CT), Orange, Ulster and Queens. I'll drive an hour or more to do business. But since I started my company in 2005, I don't think I have ever had a single closing in the Bronx, 20 minutes south of my home because of the bad experience I had there. I simply choose not to deal with the place. This is a link to my company inventory on Realtor.com if you don't believe me.
"Bilal is contradicting himself by offering to partner with agents in marketing."
One agent even mentioned that Bilal is breaking RESPA 8(a) with that on his profile. I disagree. Go to a supermarket and pick up a homes magazine.
No person shall give and no person shall accept any fee, kickback,
or thing of value pursuant to any agreement or understanding, oral or
otherwise, that business incident to or a part of a real estate
settlement service involving a federally related mortgage loan shall be
referred to any person.
Those ads are from a recent local Real Estate Book. There is NOTHING about those ads that are contrary to RESPA. Those mortgage companies are NO DOUBT paying for part of those pages with the real estate broker, and there is nothing wrong with it. They either get a call on their portion of the ad or they don't.
"If this were true, we'd hear about it." or "You should report those corrupt agents!"
It is true that there is corruption. Is it systemic? Well, everyone is entitled to their opinion, but not their own facts.
FACT: The Bronx is a borough of over 1 million people. There are about 1 million people in Westchester County.
FACT: The Bronx-Northern Manhattan MLS exists virtually in name only. In a Borough of 1 million people, fewer than 70 firms participate, and fewer than 500 homes are listed. By contrast over 60 Bronx firms are in the Westchester Putnam MLS, listing over 1100 properties.Most Bronx inventory is in another MLS!Now...why do companies leave one MLS for another?
The reason so many Bronx-based brokerages are defecting to Westchester for governance is because they have given up on their own board, which has done a deplorable job overseeing Bronx firms and ensuring a level playing field. I know. I talk to these brokers. They tell me it's the Wild West, and they have no reason to lie. Neither do I. Want names? I can introduce you to a number of decent, respectable mortgage and real estate professionals who just hear the word "Bronx" and they'll just shake their heads.
We are not talking about a few bad apples. We are talking about all too common conduct which is causing the exodus of dozens of firms per year to a "foreign" albeit neighboring, board and MLS. The evidence that some firms in the Bronx do not play fair is overwhelming. Bribes, fraud, anti-competitive practices, and lack of cooperation are all pervasive in the Bronx. Does that offend you? It should. Why haven't you heard of it? You're hearing it now. Why haven't you read it in the paper? Because it doesn't have big boobs.
I am encouraged that so many agents commented that they don't see corruption in their marketplace. But just because things are the way they are in Sarasota, Rockville, Anaheim or San Antonio doesn't make them the same way in other places. Like I said, there are some places where strangers talk in the elevator. I don't for a minute pretend to know or purport to tell you how things are in your neck of the woods. Don't tell me what I see doesn't happen. It happens. And the evidence is overwhelming.
If you were offended by what Mr. Qizilbashe's post said, you should be. But you shouldn't be offended at him, you should be offended that there are corrupt people in our industry. And catching them is very, very, tricky. Now that we've got a government that actually cares about fraud in mortgages and real estate we might see stories of bad guys getting caught. But until those who are hurt step up and start naming names, the government will view what you or I say as the hearsay of a disgruntled competitor. I've been down that road. I have put victims of predatory lending in front of reporters. But I have never gotten anyone with any real clout to listen. Maybe someone in power can make a difference.
Oh, and for the record, I never met Bilal. I never did business with him. I'm not particularly inclined to defend him, and he didn't mention the Bronx in his post. But I am interested in defending the truth. What he said in his post, while indelicate, is 100% consistent with my experiences in the Bronx. Moreover, just a few miles south on Wall Street there was (and probably still is) some of the most heinous corruption known to man the past few years. That is why we are in the mess we are in with this economy. I love that this guy has only been in mortgages for 8 months. Out of the mouth of babes. It's too bad he went and edited his profile and post after getting hammered for not sugarcoating true events.
Bilal is the messenger. Stop being offended at him. The problems in this economy occurred right under our collective noses. If what someone says ruffles your feathers, listen more closely. I am glad things are fine in your marketplace. But believe me, the Bronx is burning.