Secured Funding featured in ‘Orange County Cesspool’

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In this post from LA Biz Observed Markl Lacter highlights a recent Bloomberg story of a Secured Funding employee and their scams to cash-in on borrowers in extremely tight spots looking for cash. I wrote about the downfall of Secured Funding in an earlier post and have heard all of what Taher Afghani claims from numerous other ex-employees about the work environment of Secured Funding.

Afghani says sales pitches typically focused on what a
borrower could do with all of that money rather than on fees
buried in paperwork or annual interest rates as high as 10.5 percent
at the time, at least 2 percentage points more than the rates that
banks charge people with good credit.

“Even with explanations, most borrowers didn’t really
understand what types of loans they were getting,” says Maureen
McCormack, another former Secured Funding employee. “They just cared
about the monthly payment.”

Secured Funding was notorious in the industry for being a completely sleazy operation. In fact it was our unwritten rule (and many other shops as well) that seeing Secured Funding on a resume was a red flag for any originator or processor looking for a job.

From Marc Lacter’s piece:

Afghani describes chaotic office scenes that recall "Boiler Room,” a
2000 movie about stock brokers at a Long Island wire house. To spur
sales, Secured Funding broke its salesmen into color-coded teams. "If
you weren’t turning those calls into applications, they would drag you
out and make your life miserable,” he says. "The turnover was
unbelievable,” says Afghani, who says he watched eight people pass
through the neighboring desk in seven months. “If you didn’t cut it
right off the bat, you were just fired.” Dane Marin, who worked at
Secured Funding for a year, says managers harangued everyone. “If you
weren’t on the phone very long, you’d get an e-mail saying, `Get your
head out of your ass,”’ he says.

Some of my favorite Secured Funding moments:

Being told that the minimum fees on any one loan was 10 points. The family discount was 6 points.
That TI’s (transaction initiators/telemarketers) abused one man’s social security number to run credit more than 500 times to make their $20 bonus for running credit on customers.
Loan agents were directed to not answer phones on signing days and made it a policy to not take inbound borrower phone calls.
Loan agents regularly engaged in shady practices and sometimes outright loan fraud.

I have been told all of these things by numerous former employees, but it could just be rumor. I don’t have anything to substantiate their claims. But the deafening chorus leads me to believe that there is some truth to the claims.

I do have to disagree with Mark on the way he lumped Secured Funding in with brokers brokering deals to companies like New Century and Fremont. Secured was a direct lender and did most of their own loans via a huge retail operation. They had a wholesale division as well – but their massive direct mail campaigns fueled a large portion of their business via their own in-house agents.

Secured also did primarily high-interest rate second mortgages. Most brokers who worked with New Century and Fremont were not direct lenders (although some were). I think that when bashing the industry it’s important that we group like with like before we bash.