Michael Moskowitz says he has a hard time finding an audience to listen to him rant about his favorite subject: cleaning up the subprime mortgage industry.
"You sure you're interested in this?" asks the Ukranian-born accountant- turned-mortgage lender. "'Cause I could go on for hours."
Mr. Moskowitz has been searching for allies in his quest to eliminate fraud and unfair practices in the business of serving borrowers who do not qualify for bank loans-with very little success, he says.
But he may be winning his first battle by making himself impossible to ignore.
His constant badgering of the New York Post and Daily News in recent months has persuaded the tabloids to keep a sharper eye out for mortgage broker ads that could be misleading.
Mr. Moskowitz does, of course, have a business interest here, says Jan F. Constantine, general counsel for the New York Post's parent company, News America Inc. His company competes against the brokers for the readers' attention.
But Mr. Moskowitz's letter writing, phone calling, and ultimate refusal to advertise in the Post if it continued to print ads he deemed misleading has raised the paper's awareness of the issue, Ms. Constantine said.
This is just the first step in a crusade to protect less-sophisticated borrowers, Mr. Moskowitz says. His Manhattan-headquartered company, M.L. Moskowitz & Co., makes mortgage loans to customers who do not qualify for bank loans. The company has a firm 6-point cap on origination costs, he says.
"Look at this," he says, pulling out a loan contract from a West Coast- based "D" credit lender.
A New Jersey-based borrower was in foreclosure on her mortgage, he says, and wanted to cash out some of the equity in her home to care for an ailing mother. But the terms of her original loan give Mr. Moskowitz pause. She had been charged over $14,500 in origination and processing fees-for a $74,000 loan.
"Nineteen points, 19!" Mr. Moskowitz says, throwing down the document in disgust. "I think that's unconscionable."
"That's not American-ripping off someone who's blind, who's black, whose mother's dying," he said. "I don't think that that's free enterprise."
Mr. Moskowitz's campaign is about to get some help.
On Feb. 2, the Federal Trade Commission declared an all-out war on predatory lending by subprime companies that overcharge elderly or minority borrowers.
First in the line of fire was a tiny Washington- based lender, Capital City Mortgage Co., which is being sued by the agency for violations of fair-lending, Truth-in-Lending, and Fair Debt Collection Practices acts.
The agency is promising a nationwide crackdown on lenders who overcharge elderly and minority borrowers, and says that more suits are likely.
Fueled by Wall Street bankers hungry for asset-backed securities, the industry of lending money to people who do not qualify for bank loans has ballooned in recent years. Second-mortgage loans, personal loans, and manufactured home loans are all being pooled, securitized, and sliced and diced into investments at a rapid clip.
But along the way, subprime borrowers, who are often less financially savvy, are getting fleeced, Mr. Moskowitz said.
Mr. Moskowitz has also taken his campaign to Capitol Hill. In August, he penned a letter to every member of Congress, decrying the controversial practice of paying yield-spread premiums. Lenders often pay brokers higher fees to secure higher-rate loans, a practice that has already spawned numerous class actions.
The practice leads to gouging and exploiting of borrowers who are unaware that the broker is not legally obliged to help them find the best deal, Mr. Moskowitz argues.
In September the Department of Housing and Urban Development stepped in. Secretary of Housing Andrew Cuomo proposed legislation requiring brokers to sign up-front contracts with borrowers detailing who they represent, and estimating their fees. But the proposed legislation was greeted with shudders from the broker community, which said that it unfairly targeted them.
The practice of paying back-end compensation has been "part of the dynamic that has helped the wholesale model grow," said Brian Kinsella, chief executive and executive vice president of the National Association of Mortgage Brokers
The New York State Banking Department may taking another look at how brokers advertise, said Walter O'Meara, head of the agency's mortgage banking department. The agency, which is responsible for registering brokers and licensing lenders, is "concerned about" misleading advertisements by brokers, Mr. O'Meara said, and is drafting a letter to advise newspapers about the legality of ads.
Large lenders in the subprime arena defend the higher points they charge, and pay out to brokers, saying that loan amounts are smaller and that they require more work thanprime loans.
If borrowers are paying exorbitant fees, it is their own fault, some say. "You can't legislate against stupidity," said one longtime subprime consultant. "It's like going to a car dealer-you don't expect him tell you what he makes on the car."
Ultimately, "borrowers need to shop, and make sure they are getting a fair deal," said Brian Kinsella, chief executive and executive vice president of the National Association of Mortgage Brokers.
Anyone who thinks that mortgage brokers are not responsible for the loans that they make "hasn't seen many broker contracts lately," Mr. Kinsella argues. Last June, the 6,000-member organization adopted best- practice guidelines that brokers must adhere to, but policing efforts are limited by the agency's budget, he said.
But Mr. Moskowitz is not convinced that things are getting better-or that anyone is listening.
"Lenders don't care" if anyone is overcharging, he said. "They'll just sell these loans on Wall Street."