My Time Inside The Housing Bubble

A few years ago I briefly toyed with the idea of getting a second job on the side for some quick and easy supplemental bling. Acting on a tip from a friend, I walked into the office of a mortgage broker in northern Virginia to begin my second life as an intermediary taking advantage of information bottlenecks and client ignorance.

The president mob boss of the small company was a short Vietnamese man with manic energy, a giant gold watch, and a quick tongue. I mentioned my referral and, after sizing me up, he told me there would be an all-hands meeting in a half hour and I was invited to sit in and see if this business appealed to me.

I scanned the office. Lots of empy cubicles with flickering monitors full of excel spreadsheets being operated by invisible employees. Along the wall were closed door offices with nameplates designating various positions – VP this, VP that, CFO (!), Executive manager. Really? I popped my head into one office and another South Asian greeted me. We bantered a bit then he showed me his trophies and certificates for excellence in mortgage brokering. A huge photo of him sitting in his Ferrari hung prominently behind his desk. He noticed me checking it out and said it took him only three years to build his client list to reach the point he could buy that beauty — all it required was a solid work ethic. He was wearing a Rolex.

Just prior to the meeting a tall white guy with a frat boy striped shirt approached me and stuck out his hand. I asked him what he thought of the business. He told me what it was like getting loans for marginal clients and how to deal with Countrywide. He said he was 27 years old and was planning on making 2 million for himself by the time he hit 30. Business was so good he had no doubt his goal would be reached. He talked of a luxurious retirement by age 40.

We all sat down in a semi-circle in a large conference room. The only white guys were me and Mr. Early Retirement. There were four women, three East Asians and one white chick who looked Italian by background. The rest of the group was a polyglot of East Asian, Vietnamese or Thai, Hispanic and indeterminate ethnicity men. The two Vietnamese/Thai guys wore the sharpest suits of the bunch. Crisp like new dollar bills.

The high energy Vietnamese don entered and began a free form discussion of life in the commission based mortgage broker business. Acronyms and jargon were flying — MTAs, COFI loans, COSI arms, A-paper, Alt-A, subprime (this was before the housing bubble burst, so the word subprime didn’t trigger instant suspicion at the time), DUs, Full Doc, SIVA, SISA, No Ratio (later learned this meant no stated income), No Doc, PITI, origination fee (fancy word for screwing the client with a skim off the top), PMI, DTI, NVAR, and on and on.

Then the Vietdon looked carefully around the room, eyeballing each one of us.

“This is good, very good.” He was smiling and nodding his head. “The way it works here is simple. Trust. You earn the client’s trust and your business takes off. They trust you, they sign on the dotted line. So, for instance…” He pointed at the Asian women. “These ladies are assigned to female clients. Asian women in particular. They will trust them.”

The Asian girls snickered and one uncrossed and crossed her legs. I watched her crotch as she did this.

The Vietdon continued. “And my boys over there…” The Hispanic guys laughed. “They get the Hispanic clients. This is the way it works in this business. Now let’s be real. Most of our Hispanic clients aren’t high rollers. They’re struggling, making ends meet. They got families. They need houses to put those families in. They work hard. To get them to sign on the dotted line…” (He loved that expression.) “…you’ve got to put their minds at ease that you’re looking out for them. They trust someone who looks like them, you know?”

More nods of agreement from the Jose contingent.

“Then we’ve got our white guys.” At saying this, the Vietdon smiled broadly. “You guys, you go out in the field with a casual button down, one button at the top undone, nice shoes, real tall all-American look, and people with money trust you. I get some white clients… not too many because, you know, we mostly deal with the underserviced community…” (The group chuckled.) “…and these white clients feel comfortable dealing with a white agent. It is what it is, right? No morality tales here, we just do what brings in the business. I think we can all agree on that.” Heads nodded in unison. “It’s a little different for our Asian clients. They want to see their agents dressed in shiny pressed suits at all times. Isn’t that right, Phung!” Laughter from everyone.

“This is a good time to be in the brokerage business. The money is there. Work hard, make your calls, show up at the houses for that extra attention people love, and you can see a nice little profit for yourself.” With that, the Vietdon ended the meeting.

I showed up at the office for three more weeks, then decided it reminded me too much of cold calling old people over dinner to sell investment advice. Something about the whole operation felt sleezy, like an Amway scheme. I didn’t think the odds of me scoring easy money on the side were that great, at least not with this firm, so I abandoned the mission.

Two years later, the housing bubble burst spectacularly. Today, I wonder why all those really smart guys back then propping up the mortgage brokerage business on phantom assumptions couldn’t see the sleeziness in what they were doing like I could after only a half hour inside the business. Or maybe they did and didn’t care. And I wonder if Mr. Early Retirement achieved his goal.

Despite the unsavory nature of the brokerage business, I have respect for the Vietdon. He knew the score and didn’t shy away from it. He told it like it is. He probably violated every anti-discrimination law on the books, but he made money while the making was good.