California Mortgage Brokers Cashed In On Market

Money may not grow on trees, but for a whilel it seemed to grow on houses, and Colleen Moorhead knew exactly where to turn when she needed to harvest some cash.

With a few phone calls, California mortgage broker Joyce DeAngelo put Moorhead and her husband into a new mortgage and cut them a check.

All told, they used more than $100,000 in cash they netted from mortgage refinancing for living expenses and renovations.

Between 2001 and 2006, the Moorheads refinanced their San Diego mortgage on their three-bedroom home at least nine times, county records show.

But mortgage broker DeAngelo didn’t work for free, that’s for sure.

Each new mortgage loan carried up to $13,000 in fees, along with prepayment penalties, and the Moorheads fell deeper in debt.

A marginal presence in the industry 20 years ago, mortgage brokers have become the face of the $10 trillion home loan industry, a single point of contact between a sophisticated financial world, and borrowers committing to spend hundreds of thousands of dollars to buy a home.

California mortgage brokers may often present themselves as disinterested parties, but the industry feeds on fees from lenders and bonuses when they complete a deal.

Moorhead and her husband now owe $603,000, up from just $196,000 when they started, and more than $10,000 over what their house is worth, according to one online estimate.

They’re likely to lose it soon if they can’t somehow make payments greater than their monthly income. Their broker, DeAngelo, said she tried to save them from financial disaster, but her client kept wanting to refinance.

“I told her every time that she can’t keep doing this, she’s going to lose her house,” DeAngelo said, adding that she gave her California home loan clients tips on straightening up her finances that were mostly ignored.

“She has no one else to blame.”

As the real estate boom of the last half-decade turns to bust, homeowners like Moorhead say they feel betrayed by a mortgage broker who profited from bad advice and saddled them with loans they couldn’t afford.

“It seemed like she was a gift from God or something,” Moorhead said. “But she’s a wolf in sheep’s clothing.”

FOOT SOLDIERS

Brokers like DeAngelo helped dramatically expand the U.S. housing market in the first half of this decade, extending home loans to risky borrowers like Moorhead who because of bad credit, lack of cash, or lack of a steady job were considered ”subprime” (bad credit mortgage) borrowers.

Some 403,000 home mortgage brokers handled 68 percent of all loans in 2004, according to the research firm Wholesale Access.

Commission-based pay varied widely, although an experienced bad credit home loan officer at a brokerage or bank could earn $150,000 with a reasonable amount of effort in 2003, estimated researcher Christine Clifford.

Some newspaper reports widely talked of mortgage brokers in California and beyond who made well into six figures.

Continue reading in the San Diego Union Tribune …