I attended a conference recently and overheard a disturbing conversation in which a few mortgage loan officers were bragging about how much money they made on some of their recent subprime deals. While good loan officers can certainly make some good money in this business, sometimes it turns into abuse. And it goes to show that a subprime loan or lender is by itself not predatory. It's the greedy loan officer that turns what should be a standard transaction into one that robs customers of their equity along with some of their self-esteem.

This is America and everyone should have the opportunity to legally make a living. And while I'm not here on my very own pulpit saying how much a loan officer should make on every single deal I can also say that I know a rip-off when I see it. What surprises me still is that consumers, every day, head to a mortgage closing paying far too much for a loan only because they think they have to.

I can understand this for two reasons. The first reason is the borrower's ego being damaged in the first place. It's not an easy situation when a consumer sits across the desk from a lender and has their credit report reviewed much like a physical exam -- only it's more humiliating. It can be embarrassing and I understand that. In most cases the borrower is just happy to be approved and doesn't see any need to visit three or four more lenders only to have a potentially humiliating process repeated time and time again. Just get the loan and get out the door.

Second is the misunderstood conception that there is nowhere else to turn when getting approved for a subprime loan, that the chosen lender or mortgage broker is the only place that could approve the deal. Many times this is told directly to the borrower's face, "I'm glad you came in (I'll bet), we're probably the only place that could do this deal." But what most consumers don't know is that most subprime loans are underwritten to the same guidelines. This is very similar to a conventional loan where Fannie Mae may buy a bunch of mortgages, secure them, and sell that security on Wall Street. The same is done with subprime loans.

Most subprime loans are underwritten for potential sale in the secondary market. That means if a consumer gets approved for a subprime loan with one mortgage broker he or she can take that same approval and shop around for the best deal on the exact same loan. Are you approved for a subprime loan but the loan costs you eight points? Forget it and go elsewhere, because odds are that very same loan is available at another lender with a better offering.

I also hear arguments from greedy loan officers trying to justify charging outrageous fees because a loan is "harder to approve." If a loan fits a particular mortgage program then it's no harder to approve than any other.

If this is you, if you're a consumer looking at a good faith estimate with outrageous points, origination charges and mortgage broker fees then look around. There is absolutely no way you should be paying that much money while someone else will offer it cheaper. And if you're a mortgage loan officer who is proud of charging someone $5,000 for a $50,000 loan, then get out of the business. We don't need people like you.

Published: October 10, 2003

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, a veteran Mortgage Banker, successful Real Estate Consultant and author of Your Guide to VA Loans, Mortgages 101: Quick Answers to Over 250 Critical Questions About Your Home Loan, Who Says You Can't Buy a Home!, and Mortgage Confidential: What You Need to Know That Your Lender Won't Tell You, is a former columnist and Contributing Editor with San Diego-based Mortgage Originator Magazine. Reed is President of CD Reed Mortgage Bankers, Austin, TX and is a Past President of the Austin Mortgage Bankers Association.