Lessons in Banking: Mortgage Mania

So much has happened in the US and world economies and in our political landscape in the past six years. Some of it  has given me cause to reflect back on my experience in 2006-2007 when I worked in an entry level position for a bank that was to become a major player in the sub-prime mortgage crisis. My time at "TBTF" (Too Big To Fail) Bank  helped shape my opinions about federal regulation of large banks, something I'd never had much reason to think about before. 

Customer service representatives at TBTF got extra money in their paychecks for each caller they could transfer to a "personal banker" who would take a loan application or open a new account for them. Even if a loan application was declined, we were still paid for talking the customer into submitting it. When customers told us that they didn’t think they would be approved because they had already been denied credit multiple times, we had everything to gain and nothing to lose by encouraging them to try again "just in case your credit has improved by now." Of course every time they applied, their credit score took another hit. 

Mortgage applications were the ultimate prize. We were expected to ask everyone if they were a home owner or if they wanted to be. It didn’t matter how young or old or poor they were. We were supposed to try to engage every caller in a conversation about the benefits of home ownership and get them transferred to a mortgage sales representative. People who already had mortgages were encouraged to apply for a home equity loan or a refinance. These people were just calling to check their account balances, order checks, report a lost debit card...  

One day I heard one of my co-workers trying to talk a young college student into applying for a pre-approved mortgage. My conscience didn't permit me to try very hard to go after these incentives and I never came close to meeting the sales goals that were set for each of us, but as long as I did well with the actual customer service aspect of my job description, I managed to earn my base pay and remain in good standing.
 

When news began to break about problems in the economy due to sub-prime mortgage lending, my supervisor was quick to tell us that TBTF Bank had very high lending standards and had never engaged in sub-prime lending like those other unscrupulous banks and mortgage companies out there. I think she may have honestly believed that.