The responsibility of mortgage brokers and other front-liners in the foreclosure fiasco

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As you may or may not know I blog regularly over at the Bloodhound Real Estate Blog. Here is a post that I wrote that I wanted to share here with you if you don’t read Bloodhound.

A quick note: I am a mortgage broker and banker so I wear both hats. I consider myself in the group below.

Seth Godin wrote a great post the other day simply titled â??Responsibilityâ?? that focused on one key question: â??Are you responsible for what you market?â??

His answer was a resounding yes based on this premise: marketing
works. If you agree that marketing works then you should agree that the
idea of free choice is really not that free. Marketing influences
choice. Godin cites the decline in cigarette smoking over the period
since advertising has been significantly curtailed as one (of many)
examples:

If marketing works, it means that free choice isnâ??t
quite so free. It means that marketers get to influence and amplify
desires. The number of SUVs sold in the United States is a bazillion
times bigger than it was in 1962. Is that because people suddenly want
them, or is it because car marketers built them and marketed them?

Cigarette consumption is way down. Is that because people suddenly
donâ??t want them any more, or is it because advertising opportunities
are limited?

This post led me to some new thinking on our embattled industry and the current round of finger-pointing up and down the money-ladder.
The common refrain from mortgage brokers as a defense to the â??predatory
lendingâ?? accusations being bandied about by consumer groups and
government entities is â??We only sold what the banks gave us to sellâ??
and â??Brokers donâ??t underwrite the product.â?? These notions that depict
brokers as impotent pawns in the mortgage game with little control over
their actions-resigned to the whims of the banking world, forced to
peddle whatever products were made available by the banks- is callous
and dangerous. This position is clearly one that Mr. Godin would
whole-heartedly disagree with; and I do too.

As brokers weâ??re responsible for the loans we choose to put our
customers in. When we choose to put a retired person on fixed income in
a negatively amortizing payment-option loan for maximum rebate with out
clearly identifying their comfort level and understanding of the loan
we must take responsibility for that action. The culpability rests with
us for making greed-driven, customer-damaging decisions; regardless of
what the program guidelines from the banks say.

Whether you as a mortgage originator choose to accept a fiduciary
responsibility for your client or not-as a marketer you have another
responsibility-to be responsible with the products you market. If you
are a broker or sales person marketing negatively amortizing
payment-option loans to people as a way to simply maximize your monthly
income, you have not only failed to uphold any semblance of fiduciary
responsibility, but you have also violated the consumerâ??s trust from a
responsible-marketing perspective as well.

By choosing to market products simply based on the potential for
profit and by the marketâ??s desire for them you choose to not use the
power of marketing judiciously and responsibly. You choose to maximize
your own gain at the expense of the market and your customers.

Your choice to do this is unethical, immoral and plain wrong; regardless of where you think the true decision-making lies.

As Seth states:

My point is that you have no right to market things you
know are harmful or that lead to bad outcomes, regardless of how much
you need that job.

Along the way, â??just doing my job,â?? has become a mantra for blind
marketers who are making short-term mistakes in order to avoid a
conflict with the client or the boss. As marketing becomes every more
powerful, this is just untenable. Itâ??s unacceptable.

If you get asked to market something, youâ??re responsible. Youâ??re
responsible for the impacts, the costs, the side effects and the
damage. You killed that kid. You poisoned that river. You led to that
fight. If you canâ??t put your name on it, I hope youâ??ll walk away.

Iâ??ve walked away
because it helps me sleep at night. I know too many in this industry
who chose not to take responsibility; who continue to point fingers up
the food chains to the banks that make the products available-who
refuse to take responsibility for marketing and selling dangerous
products under the pitiful guise of â??just offering what the banks are
selling.â??

I hope that after the housing and mortgage market shake out that the
professionals left standing are the ones who have been willing to take
responsibility for the products they market in an effort to make our
industry a better, more consumer-friendly place where the products
benefit the people who use them-rather than disenfranchise them
millions at a time.