Temptation . . . . My Bad or Yours?

Often life finds a way of changing a normal work day into a docu-drama and we find ourselves in a starring role without a script. Such was the day my desk phone rang at 1:30 with a distraught neighbor on the first floor of our building telling me that he just watched one of my employees steal a computer. What? With each floor the elevator descended my anxiety rose.

My good neighbor explained that his first floor window gave him a wide open view of the parking lot. “I have been watching this delivery truck most of the morning. The hard working driver is delivering computers upstairs somewhere and he is leaving his roll up door open as he comes and goes.”

He went on to tell me about how a woman, (who he was fairly certain worked for me) stopped her car next to the open delivery truck door, got out and picked up one of the large boxes right off the truck and popped it into her hatch-back car and drove out of the lot. After he described the woman and the car I felt that sick feeling of knowing just who it was.

How I got her back to the parking lot is a long story so suffice it to say my call to her cell phone gave her very little choice. Convincing the driver to wait for her and not call the police was like putting toothpaste back in the tube, but he also had little choice. After all, what would his company think of him leaving dozens of expensive computers out in the open, unguarded? The exchange of his computer for her freedom happened quietly. She quit her job without thanking me, however; each of us learned a huge lesson that day.

For the driver: Take better care of the merchandise.

For the employee: Don’t steal. You may get caught.

For me the realization that temptation sat there in the parking lot for all to see and yet many people passed it by. But for her, it was just too much of a temptation and she succumbed to greed. This has an interesting correlation to the mortgage industry that also created a temptation that many people could not pass by. The “No Doc” loan, which was initially set up for self employed business owners with complex tax returns, tempted even the most seasoned mortgage professionals when it was allowed for general use. The open door of easy loans lured people into the parking lot of home lending. Loose jargon was thrown around such as, “liar’s loans” and “If they breathe give them a loan”….“If they fog a mirror they are ok”….credit quality went out the window as fellow colleagues would shrug their shoulders and say, “If the investors will buy them on the secondary market I’ll make these loans all day long.” Responsibility took a back seat.

Once the general public realized the concept of no income qualifying loans people quickly figured out how they could now have the house of their dreams. Income numbers were either lied about, fudged, fantasized, rationalized or faked. Whatever the label, many loans went through the system with an ultimate destination of the foreclosure department. Quality Control departments often found the discrepancy in the post close phase but by then it was too late. Worse, servicing departments trying to collect payment would learn from the borrower that they just ‘can’t afford the house’. Really? And you make $22,000.00 a month? “No I don’t.”

That is the thing about temptation
– there are always consequences hiding in its shadow.

The mortgage nightmare that still makes us tremble has many arrows. One of them is the No Income Verification loans……Did Loan Originators press the borrowers for a higher income dollar to justify the loan? Or did the borrowers lie? Or should the creators of these loan products have acted more responsibly? Or perhaps Wall Street should have considered the consequences.