Mark Kupris is well aware of what some people think of loan officers like him.
"In some eyes, I was the devil," says the narrator of his autobiographical novel, "The Liar and His Loans."
That's probably because, by his own admission, Kupris, who was a mortgage loan officer during the heady days of the housing boom, put some of his clients on the path to financial ruin by offering them loans that he knew they probably couldn't afford -- to earn a bigger paycheck for himself.
Though the deceptive lending practices leading up to the housing crisis are well known, few would openly cop to a role in the housing crisis. But Kupris (pictured left) doesn't try and hide his. His novel, which Kupris said is a memoir "with a little embellishment" and whose characters and events are based on real ones, provides perhaps one of the most blisteringly honest accounts of a loan officer who knowingly hawked toxic mortgages to those who couldn't afford them.
But Kupris, who said that he's the "The Liar" in his novel -- because that's how loan officers like him are now seen -- also faults borrowers for having willfully ignored the risks of agreeing to such risky mortgages.
"They all wanted to think they were Mick Jagger and have the trappings to prove it," Kupris, 45, told AOL Real Estate. "But someone signed these [mortgage] documents. Come on."
One of the only things that has changed today, he said, is that borrowers "no longer have the rope to hang themselves," referring to the tightened rules of lending following the housing bust.
Kupris' first deal as a mortgage broker, described early in his novel (which Kupris self-published as an e-book in August), catapults readers into the freewheeling world of his business before the collapse. Kupris, who lives in Atlanta, writes that in 2000 he offered a loan to a tree-cutter who had 40 tons of wood in his backyard. That woodpile was an eyesore that seriously dragged down the value of the client's home's, and a scrupulous lender never would have allowed a homeowner to borrower against it, Kupris said. But Kupris said the company used an appraiser who assessed the home from a "selective vantage point," allowing the deal to get off the ground.
Kupris, who said that he originated loans for four different companies from 2000 to 2008, described initially offering the borrower a 9 percent interest rate on the loan. But at the closing table, Kupris said, he revealed that the loan would actually carry a 10.5 percent rate.
The borrower still agreed to the deal, according to Kupris, because the borrower needed the $100,000 in cash. (The money came out of the borrower's equity in his home, Kupris said.)
"I did say it was in the 8s," is the way Kupris describes the deal in his novel. "But reality and the truth were going to get crossed today. His loan was getting done nowhere but here, today, and he knew it."
That wasn't only because of the woodpile, Kupris said. The borrower likely would have had trouble qualifying for a loan elsewhere because he couldn't provide any documented income.
"He worked in cash," Kupris said. "He had no W-2s. He could go in and say he made $15,000 a month, and we would say, 'OK, great!' "
Teasers and Kickbacks
Many loan officers in his industry were apparently willing to churn out such dicey loans, known as subprime loans, because the mortgages made them more money than conventional mortgages.
Such loans included payment-option mortgages that featured come-hither "teaser rates" that would later spike. Many of these loans, like the one Kupris said he made to the woodcutter, are what have been dubbed "liar loans," because they did not require a borrower to prove his income.
With subprime loans, Kupris and his cohort could charge much higher upfront costs, pocketing more cash on the front end of a loan. And they could also jack up the interest rate on a subprime loan more than they could on others, earning them a larger "kickback" from the investors who purchased the loans.
In his novel, Kupris describes one rookie co-worker, Juan, a high school dropout, who used these tactics to rake in far more money than most junior Ivy League bankers.
"He was taking home $50,000 to $60,000 for one month's pay and never attended high school," Kupris writes. "The playas that ran with Juan were in for the best time a $50,000 paycheck could buy. All of them had the best women, drinks, strip clubs, and unmentionables money could buy."
And almost anyone had a shot at hopping on the gravy train. In Kupris' book, the narrator asks his friend, Smith, a work-at-home loan officer:
" 'So let me get this straight, you can originate loans, pull credit, order the title, and close the loans from your den in your boxers?' "
"Smith sat there for a second and said, 'I prefer nude, but if we have to get formal, sure, boxers.' "
Blindly Borrowing
Despite many loan officers' allegedly deceptive approach to lending, Kupris insists that his industry alone is not responsible for the proliferation of toxic mortgages. Borrowers are just as culpable, he said, adding that they often turned a blind eye to the terms of subprime loans, preferring instead to focus on short-term benefits.
"Blaming the mortgage business for the economic destruction is like fat people blaming spoons for obesity," Kupris said. "If they think the business produced the liars in this little missive, they are lying to themselves."
Of course, many consumer advocates disagree with that assessment.
"That sounds like a mortgage broker trying to justify what he did because he hurt people," said Kathleen Day, a spokesperson for the nonprofit Center for Responsible Lending. "The guy has ruined people financially."
She added that many loan officers told borrowers that subprime mortgages were more affordable, and failed to mention that their clients would have to refinance their mortgages in a few years to keep their payments from ballooning.
"People purposely glossed over the terms," she said of many loan officers. "They were instructed to make it as hard to understand as possible."
'Making a Lot Less Money These Days'
For his part, Kupris admitted that peddling loans to "people who had no business taking them" eventually weighed on his conscience. "That's probably the reason why I got out of it," he said.
He added that when he left the industry in 2008, lending had come to a screeching halt and the "crickets were chirping."
Since the housing collapse, regulations have blocked unruly lending, and the freewheeling loan officer of the housing boom has faded into extinction. Legislation has eliminated the incentives that spurred loan officers to exploit borrowers. Due to rules passed by the Federal Reserve Board in 2010, they may not receive kickbacks based on the interest rate of a loan or get commissions based on the upfront costs of a loan.
"Loan officers are making a lot less money these days because they can't charge some of the egregious rates," said Bruce Specter, who originated loans during the housing boom and currently works at North Carolina-based New American Mortgage. "You're working a lot harder to make the same money."
That may be true, but it apparently hasn't kept Kupris out of the industry: After a four-year hiatus, he says that he recently accepted a job as a loan officer at another company.
See also:Those Mortgages Blamed for Housing Crisis? They're Back
Lifelong Renters Dodged the Housing Bust but Not Buying a Home Could Cost Them
Buy the Vacant Foreclosure Next Door? Even With the Money, It's Not Always So Easy
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Source: http://realestate.aol.com/blog/2012/10/22/mortgage-officer-mark-kupris-lifts-the-lid-on-deceptive-lending/
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