Monday, July 20, 2009

Loan Fixing

The New York Times is running an article entitled, "Subprime Brokers Resurface as Dubious Loan Fixers." Though Jack Soussana amassed a fortune selling a huge number of mortgages to homeowners during the real estate boom, his clients did not fare as well.

The article states, "He specialized in the exotic mortgages that have proved most prone to sliding into foreclosure, leaving many now scrambling to save their homes...Yet the dangers assailing Mr. Soussana’s clients have yielded fresh business for him: Late last year, he and his team — ensconced in the same office where they used to broker mortgages — began working for a loan modification company. For fees reaching $3,495, with most of the money collected upfront, they promised to negotiate with lenders to lower payments on the now-delinquent mortgages they and their counterparts had sprinkled liberally across Southern California."

1. What does it mean to be an educated consumer? What kinds of questions should you ask before paying money for a good or a service?

2. Why do so many people willingly purchase a good or a service without asking questions? Would you call it lazy, trusting, or something else?

3. What can we learn about the individuals who shifted their business orientation from selling mortgages to selling loan negotiation services? Is it acceptable to try and earn a fortune? Why or why not?

4. How would you describe the difference between a legitimate business opportunity and a scam? Does the difference at all depend on one's position vis-a-vis the business? Explain!!

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