Q: Explain your hobby of scouting out shady mortgage lenders in downtown bars and restaurants.
A: I’m like a cop who gets to know drug dealers so he can understand how they live and work. It’s not hard to spot lenders. I look for guys wearing nice shirts – usually blue – and khakis, kicking back in groups during happy hours. Then I play really dumb, introduce myself and ask what they do for a living.
At first, they usually say they work in the financial services industry. Then they tell me the name of their company. They tell me how they make cold calls all day and search the court records to find foreclosures.
I find that the ones who don’t know the industry very well are the ones who act less ethically and are in it to make a fast buck. They aren’t concerned about a borrower’s ability to repay a loan. They’re just trying to find a way to take value out of that borrower’s pocket and put it in their own. A lot of them know it, too.
They couldn’t explain to their grandmothers what they do for a living and feel OK about it, but they have no trouble bragging to a stranger.
Q: You’re royally perturbed by a relatively new Volkswagen television commercial. Why?
A: This couple is renting an apartment and playing their stereo too loudly. When a neighbor complains, they go out and buy a new house, a new car and a new stereo system with even bigger speakers in what appears to be all in the same day.
That message – that you can have everything you want and everything at once – is a lie. The majority of people just can’t do that. I have clients in foreclosure because they bought into that very idea.
Q: How can people determine what they want in a home versus what they need?
A: First and foremost, they have to be honest with themselves. They could start by looking at what they can comfortably afford versus what loan a lender would qualify them for. Those are often very different numbers.
And then they could ask themselves some hard questions: “What am I consuming that I could live without and still enjoy a healthy lifestyle?”
“How am I using the space where I currently live?”
“Do I really need a formal living room, all of these bedrooms or all of this yard?”
Q: Brothers Redevelopment delivered housing counseling to almost 700 people last year. Were those in financial trouble more likely to take a second job or cut expenses?
A: They were more likely to get a second job. They didn’t want their neighbors to find out that they needed to sell their homes. They didn’t want to explain their situation to family and friends. They decided they could work 90 hours a week and never enjoy the things they were working for, and that was somehow OK to them. For me, it’s not.
Q: What mortgage loan offered today bothers you most?
A: Interest-only, adjustable- rate mortgages are a fancy way of renting your home. If you’re not paying principal, you’re not building equity.
I tell clients considering any ARMs that they need to look at the high-end interest rate – or cap – that should be provided to them before they sign. If the interest rate were adjusted up to that limit, people should be asking themselves, “Can I afford that?”
If they can’t, they need to have an exit strategy for leaving the property before that higher interest rate kicks in – and it will kick in.
Q: What could Colorado do to better protect consumers from bad lending practices?
A: It could start by licensing mortgage lenders. I would also like to see more lenders’ commissions tied to the success of a loan.
If a lender’s commission is based on whether a borrower repays a loan, you can bet that lender will think twice about putting someone into a house they can’t afford. And you can also bet that lender would bend over backwards to explain to borrowers what they’re really getting themselves into.
Q: What’s the biggest mistake borrowers make?
A: Signing documents they don’t understand and documents that are intentionally left blank by lenders who say, “I’ll fill in the missing information later.”
Q: What’s your personal motto?
A: Tomorrow is an assumption.
Q: You’re 26. How did you figure all of this out?
A: Money treats everyone the same regardless of age.
Edited for space and clarity from an interview by staff writer Christine Tatum.
