How did the Mortgage Crisis Evolve?

Mortgage Brokers have received the majority of the blame for the current sub prime crisis and some experts are estimating that 70% of Licensed Mortgage Brokers will surrender their licensing by the end of the year.

But before you jump up and down for joy, please note that Washington State’s Mortgage Brokers have some of the most stringent public reporting requirements in the nation. Unlike banks, they are required to list every expense and every source of potential income on the initial Good Faith Estimate. Brokers who do not obey state and federal law are fined and shut down by the Washington State Department of Financial Institutions during routine audits.

Wholesale Mortgage Bankers can offer a diverse range of reputable lending products to borrowers at lower rates than many retail banks. In fact, despite the black eye the mortgage industry has been given by the media, a number of mortgage brokers and loan officers have never even closed a "sub-prime" mortgage.

So, what really led us into the mortgage mess?

Many of the nation’s largest banks dangled huge payouts to bank CEO’s in exchange for millions of dollars in bonus payments. You know the routine - it's become the mantra for U.S. investing -- short term gains and absolutely no incentive to limit risk.

Here are a few examples of some of the payouts received by the Nation’s top Banking CEO’s:

James Cayne, former CEO of Bear Sterns received $39 million in bonus pay for the calendar period from 2004 to 2006. He left his position with Bear Sterns in January of 2008, just before the bank was bailed out with help from the Federal Reserve.

Angelo Mozilo, CEO for Countrywide Financial, cashed in $400 million in stock options from 2003 to 2007. Early in the year, Countrywide received a combination of $13 billion in bailouts.

Kerry Killinger, CEO for Washington Mutual received $24 million in 2006 alone. The subprime related crash has all but wiped out all shareholder gains since 2000. Washington Mutual is also a recipient of a recent bail out.

The head of Citigroup received $40 million, just as stocks began to plunge.

The head of Merrill Lynch was given $160 million when he retired in 2007.

Every single one of these executives got to keep the money they were paid, despite the fact that stockholders lost millions.

Who’s to blame?

The major lender’s Board of Directors that approved high risk subprime products in order to reap short term profits.

Wave enough money under someone's nose and they will probably do stupid things. After all, Bank CEO’s are not rewarded for sustainable corporate growth ---