CALLER: Basically, he’s trying to do to the mortgage industry what he is in the process of doing to the health care industry, the insurance industry. And what he’s doing is he’s making it — the government is making it — harder for the mortgage industry to service the consumer, and this all was created under the guise of “we’re gonna protect the consumer,” but the real truth is it’s gonna hurt the consumer ’cause it’s gonna make it harder for first-time homebuyers and low- and moderate-income people to get a mortgage, to refinance a mortgage, or to buy a home.
CALLER: It’s gonna make it more expensive.
RUSH: Why? What does it matter? Just as a simple point: What does it matter how much money you make a year as to whether or not somebody gets a mortgage?
CALLER: Well, it’s based on the loan amount. It’s based on the loan. They’re saying that we cannot be paid based on the terms of the loan, but that’s how the mortgage industry has been since its inception. So now we’re saying, “Okay, tell us how we can pay ourselves.” For instance, a mortgage broker can’t sell his business because you sell a business based on its profitability.
CALLER: But under this law, if you sell your business based on profitability, you’re in violation and you go to jail.
RUSH: If you sell the business on the basis of profitability you go to jail?
RUSH: Well, you know, this isn’t —
CALLER: You cannot be paid based on the revenue generated by loans.
RUSH: Well, what pray tell…? (laughing) On what are you to be paid then?
CALLER: Well, that is a good question, Rush.
RUSH: I mean, where is the income generated if it’s not from the loan being paid back?
CALLER: Well, it is generated by the loan, but now the companies, they’re being told, “You cannot pay the loan officers based on the revenue brought in.” So you can set ’em up on a salary —
CALLER: — or you can set ’em up on a percentage of the loan amount, but not a percentage of the revenue.
RUSH: Well, tell me this. Back in the days of the subprime, Michael, how was anybody making any money when you guys were ordered to loan money to people that could never pay it back?
CALLER: Well, back then it was a lot easier. Now, you know, I’ll be the first to admit that there were a lot of unscrupulous people in the mortgage industry, and I’ve always said, “Crooks are like cockroaches. You turn on the light, and they scatter.”
RUSH: No, no, that’s not what I mean. No, no, no, no, no. I’m not going there. I’m simply saying: You’re saying that you make money as a percentage of the profitability of your loan that you make, okay?
RUSH: How in the world did anybody make any money? I’m talking about you guys, a loan officer, not management. How did any of you guys make any money when you’re loaning money to people that never had to pay it back and never could pay it back, the subprimes?
CALLER: (noise of moving things around) Not sure if I understand your question completely, Rush.
RUSH: Okay, you’re gonna make a loan to me.
RUSH: I’m never gonna pay it back. The government’s telling you that you gotta loan it to me because I’m poor. You gotta give me the money to buy a house but I’m never gonna pay it back because I can’t, I don’t have any income but the government’s making you give me the money anyway. Subprime mortgage. Okay, so there’s a loan that there’s no money that’s coming in to pay. How do you make a salary on it? How do you make a living on it?
CALLER: (cell phone garbled) Well, the money is generated when the loan is sold to the investor, whether it’s a subprime investor or —
RUSH: Yeah, but it’s still worthless paper.
CALLER: Excuse me?
RUSH: But see, it was still worthless paper. As far as the subprime is concerned, this was the problem with it from day one. You think that the Feds are getting involved in your mortgage business; they’ve been involved in it for 20 years (probably longer than that, but at least in a direct way that impacts you). The Community Redevelopment Act required that loans be made to low income and no-income people. You were forced to do it. You don’t sound old enough. Maybe you weren’t making mortgage loans back then. I’m talking about going back to the mid- to late nineties. How long have you been in the mortgage industry?
CALLER: For a long time. I’ve been in business for a long time, and I was in the business back when they were doing subprimes, and I didn’t really get involved in those loans as much because I mainly dealt with people had good credit, good income — and, you know, we dealt with, you know, self-employed borrowers who needed a stated-income loan because that was what stated-income loans were created was. Because when you underwrite a loan and you’re look at income somebody who’s a W2 employee, you go off their gross income, but as a self-employed borrower you go off the net income, and it’s… You know, if a business owner has a good CPA obviously he tries to show as little profit as possible to pay the minimum amount of taxes.
RUSH: Well, exactly but the point…? So you didn’t have to get involved in the subprime business. But I’m just wondering — based on what you’ve said, I’m thinking just now with a naturally passionately curious mind –Well, how did anybody make any money loaning money? I know Fannie and Freddie bought it but there was still nobody paying it. Nobody was paying on the loan. The financial industry had to come up with all of these derivatives and the collateralized debt obligations to make the paper worth something. You can’t give somebody $150,000! This is what they were doing: A subprime mortgage was giving the money away.
Nobody ever had to make a payment. So there’s no money coming in, so the lending institution is out 150 grand, so I’m saying to the loan officer in charge that (if what we’re hearing is right): How did he make a dime? You can sell the mortgage but still nobody is paying any money on the mortgage. And Fannie and Freddie are how much in debt? The whole thing was a mess. My point to you, Michael, is this is just the latest: The federal government intruding in the mortgage industry now determining how it is that you can make money. But I’ll tell you, Michael, it’s not just your industry. Let me tell you about radio. Let me tell you about radio sales.
It’s really no different. I could get an endless parade of advertising executives from radio stations to come in here and tell you horror story after horror story. Each ad executive station gets a list of clients, and obviously some lists are better than others. Some people have lists of people that don’t advertise. Some advertisers are on the list. I’ve heard horror stories. An ad exec has had his commission dropped, his list changed, if he starts making too much money — and that’s not because the federal government’s involved. It’s just the way the business ran, and in some places it didn’t happen.
It depended on who the manager was. It depended on what the philosophy was. It depended on whether they were creeps, whether they were decent motivators or not. Now, in your case you got the federal government moving in; that’s pretty oppressive. But the federal government’s been involved in the loan business, the savings and loan business, the mortgage business for I don’t know how long. Now determining how much money you can or can’t not make from it? Yeah, that’s a red flag to everybody. That is a… (interruption) Well, how is the housing market going to recover with all this stuff going on?
Okay, how is the housing market going to recover? Well, it will. The housing market’s gonna be driven by purchases and that’s gonna happen when people are able. Whenever that happens and people have the ability to buy a house, they will. There are a lot of factors involved there, but that doesn’t… You know, normal cycles will continue to take place. Economic cycles. But it still doesn’t disguise the fact that this administration is putting itself — is inserting itself — in the mechanism by which people acquire wealth. It’s either the tax code that is a penalty — and believe me, the income tax, folks, is designed to prevent the acquisition of wealth. Pure and simple. That’s what it is.
In addition to all this gobbledygook about “funding government services and, blah, blah, blah, blah,” it’s designed to prevent the acquisition of wealth — and it does in all too many cases. So I’m not surprised that they’re getting involved in this way. I’ll tell you, the excuse for it probably is that by limiting how much, Michael, you and people like you can make, the loan will be cheaper for the disadvantaged American who is already the victim of capitalism and greedy people like you. So if the government moves in and dictates how much you cannot make on a loan that is a smaller monthly cost to the consumer (i.e., more affordable), therefore, you take it on the chin.
Welcome to the Democrat Party running the country.
Pure and simple. That’s all you need to know about it.
RUSH: Folks, what this mortgage banker, the mortgage broker from St. Louis was describing is a command economy, and it’s what Obama wants for everybody and everything. We’ve talked about it in different terminology here, but the idea that we’re gonna spread misery, we’re gonna spread equality, we’re gonna redistribute wealth, we’re gonna make sure the rich are taken down, social justice. In this case the way it’s justified is that why should somebody get rich off of the pain somebody has to go through repaying a mortgage? Why should somebody get rich doing that? This is just under the nose of the tent that is the command economy that Obama wants for everybody.
It’s like every other command economy, some people are gonna get more social justice than others. Some people are gonna be preferred. Whoever Obama and his minions think are the most disadvantaged or the most taken advantage of, or what have you, and I guarantee you, if you have any position, if your job is in any way considered management or executive, you are going to pay for it. And then iin your position, in management or as an executive, you are taking advantage as the mortgage industry clearly does just by definition, according to Obama. Obama looks at it, why should somebody make money off of a loan? I guarantee you he looks at it that way. Why should somebody make any money off a loan? You’ve got a house, why should somebody go broke having a house? Why should the person who makes the loan get rich? I guarantee you this is how he looks at it. Social justice. That is how Sharia law sees it. Damn right it is, Snerdley, it’s exactly how Sharia law sees it. Interest is sinful. Financial interest, making money off of money is sinful. Andy McCarthy, my old buddy, says if you want to know how Libya is gonna end up, learn Sharia law. Sharia law will tell us where Libya is headed. Sharia law will tell us where Egypt is headed. Sharia law will tell us where all of the Middle East is headed. It just takes the courage to believe it.
RUSH: Jeff in Atlanta, it’s your turn on the EIB Network. Hello.
CALLER: Hey, Rush. It’s an honor to be on your show.
RUSH: Thank you, sir.
CALLER: You had a caller a while back who was a loan officer and you had asked him the question: How does the lender and how does that loan officer make money on a bad subprime loan? I was gonna handle that one for you.
CALLER: All right. Well, basically what you have is there is the originator of the loan. That is gonna be the company — let’s say it’s ABC. They’re originating the loan; the loan officer works for them. They take the application, they approve the loan, they fund the loan — and at that moment at the closing, that’s when their loan officer is getting paid, and that’s when that company that’s originating the loan is getting the money. Now, what happens is, that’s when the profit’s made by them. But then they take that loan, as well as others they’ve created, and they then sell them in the secondary market to Fannie Mae and Freddie Mac.
RUSH: Let me stop you right there. Let me stop you, because is it true that once you start selling — package these loans and sell ’em — isn’t it true that you’ll package some bad loans with good loans? In other words, you don’t just sell a package of bad loans to people, or what you think are bad loans. It’s a combination of things so that your investors are buying what they think are good loans, right?
CALLER: Yeah, and that’s the time they sell them, you know, they sell them so quickly. And, you know, you’ve maybe been through a purchase thus much — you probably use cash, of course, which is smart. But most people, you know, they get the loan, that loan is sold sometimes even before they leave the closing table, it’s already been sold, and so what happens is they don’t know at this point whether these loans are bad or good. So the real culprit here, of course, is Fannie Mae and Freddie Mac, and what they did and what caused this whole problem is they allow… Because if Fannie Mae and Freddie Mac, who set up the guidelines of what they will purchase, if they didn’t purchase loans with…hmm…questionable…hmmm…kind of guidelines that people would default on, then these lenders would never have originated these things to begin with, because they’d sell ’em off, and so it’s Fannie Mae and Freddie Mac who set up —
RUSH: Right, so it got —
CALLER: — those guidelines.
RUSH: It got to the point, then, that if a lender was told that his loan would not be bought by Freddie Mac or Fannie Mae, he wouldn’t make the loan, right?
CALLER: Absolutely not. Exactly. And, you know, to blame the lenders, that’s a joke. If that secondary market wouldn’t have been there, those bad loans wouldn’t have been originated. Certainly some of them would have because they don’t all get sold to Fannie Mae and Freddie Mac, but certainly large percentage do — and so the blame rests squarely upon them. And, of course, hence to government who helps coerce, you know, pressures Fannie Mae and Freddie Mac, to, you know, lower the limit so you get more people approved for home ownership.
RUSH: All right.
CALLER: Creating bad problems.
RUSH: I remember when this first happened to me. I bought a house I had no business buying in Kansas City. I believed a bunch of stupid advice — twice! I had no business buying it, and then I shoulda sold it, and they said, “No, no, no! You never sell it. That’s your one asset. You hold on, go broke paying it off.” Okay, which I did. But I’ll never forget six months after — and I knew the loan officer and I’d spent a lot of time getting the loan and all of a sudden I get in the mail this book of coupons that I’m paying somebody else. And I said, “What the hell is this?”
So I had it explained to me, “Well, somebody bought your mortgage and a whole bunch of others.”
I said, “Who? Ah, it was somebody out of town.” I didn’t know them.
I said, “Well, I don’t like this. A bunch of people I don’t know I’m now writing my monthly mortgage check to?”
You know, I kind of liked knowing who it was I had cajoled the loan from — and that was seventies. So that’s when I started learning about how all this worked, and I still was in the dark about it for a while. But, anyway, look, I appreciate the call, Jeff. That answers my question. You get paid at the time the loan’s made before somebody even pays it back. But specifically, you know, what I was asking about this guy that called earlier in the program: There were loans made to people that everybody knew were not gonna pay a dime on them. That was the whole point. They were forced to. The lending institutions were forced to by federal government.
Some people were not even having to fill out applications. They just signed it! It was an utter disaster, and it was all the Democrat Party’s idea of “affordable housing.” It was how things are gonna be “made fair,” and you think this sounds strange, folks, don’t doubt me on this. This is exactly how these people think. “It’s just not fair that some people should be able to afford a loan to buy a house and others shouldn’t, and so the way to make that legal is to force the lender to give people a loan that can’t pay it back and we’ll figure it out later,” and here we are. I know it sounds ridiculous, it sounds absurd, and it sounds way too simplistic.
But it’s what happened. It’s just one way of creating social justice. It’s another way of redistributing wealth under the guidelines of within the system. You know, it’s much easier to say that you’re lending somebody some money as opposed to giving it to them when you go through the process of making ’em sign an application, get their payment booklet, and all that — when you know from the moment they walk out the door they don’t have the money to pay you a dime. They don’t have the money to pay their phone bill, for crying out loud! But they’re gonna go get a house.
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