What you're glossing over is that your Broker #2 (the mortgage broker) doesn't get paid unless the deal closes- so he has ample incentive to "push the envelope", ethics-wise.
Case in point (actual case)- 75 year old woman comes to my office- she borrowed $200,000 on her house (to help her daughter through a divorce- daughter was helping with the payments until she lost her job, now mom's house is going into foreclosure). Mom's total income was $1,300 per month (pension and SS), payment was about the same. Her question to me: "Why did they loan me so much money, when I obviously couldn't pay on my own?"
I looked over the printed application, and called her attention to the "Income" section- In addition to her SS and Pension income (which were correct, to the penny), there was "Other income- $3,000/month". She had no idea how it got there. She had a copy of her original hand-written version, and it had only her true income. Long story short, broker did a "stated income" loan, and just "stated" the imaginary $3k in order to qualify the loan.
Mom had moved in with her daughter and they were happy with that situation; she had taken all the equity out of the house with the $200k loan; so I suggested she just let it go back, as though she had "sold" it to the bank for the $200k. (and it was worth substantially less than that after the crash). She was happy with that, and did so.
Bad news is, the crooked mortgage broker didn't go to jail.
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Today's Featured Article - Listening to Your Tractor - by Curtis Von Fange. Years ago there was a TV show about a talking car. Unless you are from another planet, physically or otherwise, I don’t think our internal combustion buddies will talk and tell us their problems. But, on the other hand, there is a secret language that our mechanical companions readily do speak. It is an interesting form of communication that involves all the senses of the listener. In this series we are going to investigate and learn the basic rudimentary skills of understanding this lingo.
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