A mortgage lead generation company hired me in
January 2003, where I called individuals who had completed
online mortgage applications, usually many months or years after
they completed the application. The operation used automated
telemarketing dialing equipment.
“Hi this is John with ABC loan search, you recently or possibly
some time ago completed an online mortgage application, I am
calling to inform you that mortgage rates are at an all time
low. We may be able to substantially reduce your interest rate
and decrease your monthly payments, one of our mortgage experts
could do an analysis of your loan tomorrow or would sometime
next week be better for you?”
Nine in ten would politely decline; one in ten would agree to
the mortgage consult if you were good at telemarketing, one in
fifty would go ballistic. Most of the individuals had been
called multiple times, some possibly hundreds of times
Within a few weeks I was in charge of internet marketing, a
month or so later I was Vice President of Marketing, after my
predecessor, allegedly jumped ship and stole most of the lead
companies customers.
My first day after six hours of dead ends I finally received a
prepaid open purchase order of 100 leads daily from Ameriquest
Mortgage.
The office went through a move around March or April of 2003. It
was supposed to be done over a weekend, but ended up lasting
over two weeks. During this time I created a website which
generated online applications from borrowers searching on
Google. I developed a system where I could generate an
application for less than fifty cents, which then could be sold
for about $10 to $30 to lead companies.
I learned during my second month that Ameriquest was engaged in
highly fraudulent, predatory, usury, and illegal lending
practices. The first loan I analyzed by Ameriquest charged
$15,000.00 in fees on a fifty thousand dollar loan. Brokers were
precluded from making loans less than $100,000.00 because of the
fee cap of 6% in California which was where most loans
originated. The Ameriquest business plan permitted them to
refinance any loan amount and still make thousands on loans as
small as $15,000.00
The husband and wife that owned the holding company that owned
Ameriquest were the top campaign contributors to both the
Democrats and Republicans. Ameriquest was able to hide the usury
rates. they were the bank, they obtained their own funds, they
securitized and packaged their own collateralized debt
obligations. Usury was only detected when brokers, or lenders
that brokered loans, were showed excessive fees they were paid
by the lender and the borrower in the loan documents, in
California.
When I became aware of the "Pay Option ARM" it required several
weeks of calling lenders to finally determine what they were and
how they worked. No one in the mortgage industry fully
understood how the loans worked. I shopped mortgage companies.
One day I shopped Washington Mutual's Mortgage Office in Irvine,
CA for a “Pay Option ARM”. They were the second major lender to
offer the Pay Option modeled after World Savings, which
developed the "Pick a Payment" then Washington Mutual copied and
called a "Pay Option ARM". The loan officer dressed to the nines
proceed to explain that even paying the minimum payment 1.25%
amortized over thirty years, the loan positively amortized. He
even took out his calculator to show me the reduction of
principal when paying the minimum payment over the course of the
first year of the loan.
He told me that the minimum payment would not cause the loan to
negatively amortize, when the payment was about half that of an
interest only payment. He engaged in fraudulent
misrepresentation. Nearly all loan officers and brokers lied in
order to make a loan. One frequent practice was to tell a
borrower that they secured a locked rate on a purchase loan.
They knew that the borrower would have to vacate their current
home as proceeds from the sale were used to secure the purchase
loan. They would quote rates that were complete fabrications. At
the signing the borrower would scream, cry, but generally they
always signed the mortgage contract. They signed a mortgage with
substantially higher rates and fees charged, than those the loan
officer said they had locked, and provided in a Good Faith
Estimate.
“The "Pay Option ARM" many times did not include anything other
than the minimum payment which eventually became 1% amortized
over 30 years. The minimum payment, was also represented as a
fixed payment which could only increase a maximum 7.5% annually
during the first five years of the loan. Once five years had
passed or the loan to value ratio exceeded 115% it recast into a
fixed payment mortgage which was amortized over the next 25
years. They were advised that they would never need to pay these
much larger payments because they could simply refinance with a
new "Pay Option ARM". Fixed rate, fixed payment, were the words
used by the loan officers, the loan officers actually had no
comprehension of how "Pay Option ARM" was structured.
In California, when a home had an existing $300,000.00 loan
seasoned over three years was appraised at $500,000 the borrower
could finance $450,000.00 with a “Pay Option ARM”. Typically,
$27,000 was paid in commission to the broker by the lender. The
borrower was able to bank or spend $123,000.00, their monthly
payment would be generally be lower than their existing
mortgage.
A loan officer might say when telemarketing: “Yes that's right I
will pay you $123,000.00 to lower your monthly payment several
hundred dollars a month.”. A reasonable person would take the
expert advice and let a lender or broker pay them to lower their
payment.
Since that time I have restarted my company Mortgage Loan
Solutions, with the intention of informing anyone who has been
sold a "Pay Option ARM" is a mortgage contract worth less than
the paper on which it is which it is written. I am trying to
develop all the form's necessary to sue, or defend themselves if
in default, pro se'. I estimate 99.9% of lawyers, consultants,
and government contracted non-profit mortgage advisors paid by
the government to modify the "Pay Option ARMs" are at worst
criminals and at best ignorant of the existing litigation
nullifying mortgages and dismissing foreclosures. The
government-sponsored organizations are reducing the liability to
financial institutions deemed to big to fail and failing to
advise the homeowner’s that their mortgage is invalid if it was
fraudulently misrepresented to them by the loan originator.
AIG received 57 billion in government bailout money. They were
deemed to big to fail. They guaranteed the securitized mortgages
through credit default swaps. When the securitized debt
obligations failed, it caused AIG to fail. In the past an
insurance company issued insurance, which is regulated by law.
Credit default swaps is insurance unregulated by law. AIG was
under no requirements to maintain reserves in the event they had
to pay for the collateralized debt obligations, which went into
default and required 57 billion in federal funds to allow AIG to
remain solvent..
These companies need to fail, and the government needs to step
in and fund small business loans made to create banks, that
engage in banking; stock brokers who buy and sell stocks and
bonds, insurance companies that sell insurance, there needs to
be thousands of independent financial limited to a specific
financial market so these businesses compete for business. These
businesses will earn customers and profits the old fashioned
way: by providing the best services to their customers. We would
once again achieve Adam Smith’s free market system by regulating
businesses to act in the public interest and eliminating methods
of making profit through enacting laws similar to Glass-Steagall
act.
Were these mega financial institutions be allowed to fail, the
losses would occur to investors in foreign countries: China,
Japan, and Saudi Arabia, UAE, and Europe. They are the ones who
own the vast majority of these “collateralized debt
obligations”. When and if these "Pay Option ARMs" are litigated,
it would allow a sizable portion of the poorest segment of our
population to own their homes outright. This alone would provide
tremendous stimulus to our economy as 20% of homeowners will no
longer need to pay a mortgage allowing that money to be spent on
durable goods, automobiles, computers, etc.
Will individuals like myself with my website currently under
development:
http://mortgage-loan-solutions.com and individuals like Neil
Garfield who moderates
http://livinglies.wordpress.com, be able to successfully
inform these injured borrowers of their legal rights. We try to
show injured borrowers to litigate, defend , and/or find a
qualified knowledgeable mortgage attorney.
The courts hold the solution to our nations financial crisis, I
am doing my best to bring about this solution by making the
injured borrower’s knowledgeable about the legal remedies
available to them. Only time will tell.
John Haggerty
The "Nuclear Option" or "The Option ARM"
by: John Haggerty original Summer 2004 revised September 2009
Remarks by Alan Greenspan"Anyone who has an "Option ARM" and doesn't refinance it before the bubble bursts will lose their home. ..."option ARMs which allow for a limited amount of negative amortization. These products could be cause for some concern both because they expose borrowers to more interest-rate and house-price risk than the standard thirty-year, fixed-rate mortgage and because they are seen as vehicles that enable marginally qualified, highly leveraged borrowers to purchase homes at inflated prices. In the event of widespread cooling in house prices, these borrowers, and the institutions that service them, could be exposed to significant losses. Many borrowers of the "Option ARM" thought they had a fixed rate mortgage, did not know that the minimum payment could go up over 1000% at any time if the LTV were to go above 115%. The homes are financed up to 95% of the appraised value which would only require a 20% correction while many economist are forecasting a 40% drop. in a survey conducted by MLS. Many borrowers believe they have a 5-30 year fixed payment. Our "Financial Experts" will review any borrower's loan with the borrower free of charge. We have over 4500 complaints listed against the nation's leading lenders.