Better consumer legislation and protection is a help but ultimately I think that consumer education is the best weapon. If the consumer better understands what they may be getting involved in then they will have a far better chance of avoiding problems. I run a mortgage information site and I always try to explain the potential pitfalls as I feel that is the best way to help people avoid some of the disasters that could await them.

Thank you for your thoughtful reply. I agree the needs of the corporation and LO to profit are at odds with ethical decision making. It is up to the employees to choose (and be taught to choose) the ethical path. It is the corporation’s job (passed down from leadership) to balance the objectives of profit with the ethics of sound lending practices. It is the industry’s job to help corporations define what those are above and beyond the scope of law.

Thank you for sharing your insight – it is exactly where I hope this conversation will lead.

By it’s very nature, corporations have but one purpose: to maximize profits for their shareholders within the bounds of the law. A corporation’s purpose is not to be like a Mother Theresa figure and take on the responsibility of (in mortgage lending, for example,) offering free loans to all needy people; How would we define needy?

By definition, corporations are not formed for moral purposes. The pursuit of profit; money, is not a moral pursuit; It’s an immoral pursuit.

Research surrounding structure and structuralism is quite definitive in that the structure a person finds himself or herself in is HIGHLY influential over that person’s behavior.

Back to corporate structure: corporations are suppose to maximize profits within the bounds of the law. This means we’re all suppose to play by the same rules.

In answer to your question, a corporation ought to at minimum, follow existing state and federal law. HOWEVER, corporations don’t always do this. Why? Because it’s a question of profitability. If a corporation can break a law and earn MORE profits than it will have to pay out in fines, then the decision will most likely be to break the law. A good example of this is the national title insurance companies whose leaders signed off on decisions to blatantly violate RESPA. The penalties levied are paltry compared to the profits made, yet the national title insurance companies have codes of ethics that ALL employees are required to read and sign, that tout integrity and honesty.

A moral person in a corporation is often not the top producer or the star manager, yet we reward and promote workers based on immoral acts. Read the legal case settlement on Ameriquest to see how this corporation settled (while admitting no wrongdoing) and agreed to change their unethical business practices, described for all to read in the settlement.

One solution for the line workers who see these abuses would be to just quit. However, not everyone is in a position where they can just quit their job.

Abuses of power, and continuous misuse of, say, stated income or no-doc loans for W-2 employees or pushing naive clients into subprime or ARM products with prepays because an LO will earn more are a product of the corporate mortgage broker culture. Honest, honorable mortgage brokers have the hardest time accepting this because they don’t put up with that kind of employee behavior at their firm. HOWEVER, to pretend that it doesn’t exist leads to problems like the subprime implosion where thousands of workers lose their jobs and thousands of homeowners enter foreclosure. Blaming wholesale lenders or Wall Street investors is just that: blame-shifting.

The most humble mortgage broker looks into the practices of his or her own industry, takes off the rose colored glasses, and really listens compassionately to WHY LOs were abusing their positions of power. Usually it is because nobody taught them to conduct their business any other way. Sometimes it becomes a choice between personal self interest (if I can push this person into an ARM loan, I can take my family on a nicer vacation next month). It is up to the industry to teach it’s workers how to be moral. Corporations are not going to do this job; the workers must do this for themselves.

When I wrote the MILA blog article, I had no idea it would attract over 100 comments from former employees. My intentions were to just be the first blogger to get the scoop out on raincityguide.com A blog is a place where people can post anonymously and share real emotion as to what it was like to work at a place like MILA. This is worker solidarity in action. We now have a place to go (blog world) before we accept a position at a company, working for a specific manager, to see what others have said about this person during a dark, evil time at that company.

Those employees were treated like shit when they were laid off, and they won’t soon forget it. I would guess that the treatment chosen by management was in line with the goal of corporations: to maximize profits or, in the case of MILA, to minimize the amount of money the company would have to spend to be more compassionate toward people who had been very loyal to the company.

Thanks for your very thoughtful blog article. When I eventually get around to setting up an ethical lending foundation blog, I will link to it!