The Problem

• Conflicts of Interest caused the mortgage meltdown

• Competition replaced with Captive Markets

• Boycott, Betrayal and Bribery disguised as fiduciary duties

• Safeguards Neutralized - Appraisal, Home Inspection, Title Exam, Closing, Attorneys and Realtors all affected

Who or what caused the mortgage melt-down?  

While a lot of attention is being focused on multi-billion dollar Wall Street firms that gambled and lost on risky debt, we believe a huge underlying cause that has yet to receive as much rightful blame for this catastrophe is the real estate industry. We believe conflicts of interest and self dealing have eroded the foundations of the residential real estate industry to the lasting detriment of consumers, many of whom now find themselves dispossessed of their most important investment, their homes.

Something bad has happened to the way American real estate gets transacted. The huge amount of damage to our economy is in direct proportion to the complexity and severity of the problems that still exist in the residential real estate industry. To cause such extensive damage the problem goes far deeper than just the mortgage industry.  If anything, that industry is just the "fall guy" for a far larger problem.  The problem encompasses the whole residential industry.  Most of the responsible parties have yet to be investigated for their part.

Capitalism and Competition Have Been Wiped Out

Healthy capitalistic and competitive forces do not drive the residential real estate industry. Although real brokers fiercely compete for clients, once they bag their prey it is the consumer’s trust and vulnerabilities that become the commodity most sought after. Partly it is the boycott power Realtors possess to influence the investigative work of safeguard industries such as inspection, appraisal, title, closing, and legal services that might otherwise quash a deal and the Realtor's commission. Partly it is the Realtors’ mangled sense of loyalty that has been polluted with dual agency, anti-competitive practices, contracts of adhesion, bad laws, and a proclivity to provide unauthorized and very bad legal advice. Partly, it is the ancillary services those Realtors “recommend” that are directly under the control and directly benefit the Realtor and the brokerage firm for whom they work. 

Similar issues haunt the residential construction and mortgage industries.  When the builder claims that it is more expedient to close with their own title company, they are right - it's much faster and the deals almost always close.  But wouldn't you rather have a title company that will call attention to an underlying blanket mortgage or mechanic lien issues?

When all tolled, the protections and competitive forces upon which consumers and investors have been encouraged to rely do not exist and have been replaced with an anti-competitive system that’s only purpose is to ensure that commissions get paid and that consumers pay the highest possible price for ancillary services. Practically any safeguard that stands in the way of a commission has been secretly converted to protect the commission.

Boycott, Betrayal and Bribery

The predictable result of switching off consumer and investor safeguards and is a system that ensures that almost every transaction closes. When even the bad deals close, an atmosphere is created that facilitates fraud and the volume of "bad" transactions will increase.  It also ensures that consumers almost always qualify for and pay higher and higher amounts for their homes, mortgages and ancillary fees. It is the ultimate “Ponzi Scheme” that must eventually collapse. 

From appraisers to attorneys, you will see how all industry players have been affected by common themes of boycott, betrayal and bribery that have consumed this industry. Starting with the large real estate brokerage firms and following a trail of other service providers, the exploitation of fiduciary relationships has become a trillion dollar cartel of businesses that continue to sicken our economy, our government and even the basic values of our country.

Almost every safeguard has been neutralized, almost every fiduciary has been compromised and almost every competitive force has been replaced with relationships that capture business unfairly and distribute it to “partners” causing higher prices and excessive fees to abound.

Once a consumer steps into the residential real estate machine, they are typically treated to a menu of betrayals and abuses that would be illegal except for the lobbying success of the giant trade groups that have made betrayal into a legal “marketing strategy.” The laws and even the regulators are often in the “back pocket” of this industry.