RISMEDIA, March 23, 2009-A former New York mortgage originator who spent four years in prison for securities fraud says President Obama’s plans to help the mortgage industry correct itself while aiding millions of nearly bankrupt Americans trapped by unaffordable mortgage payments doesn’t do enough.
Michael Sichenzia, president of South Florida-based Dynamic Consulting Enterprises, says the Obama program still leaves plenty of room for unscrupulous mortgage industry representatives to continue exploiting the system by victimizing those whose only hope was to achieve the American dream of homeownership.
Having served four years in New York State prisons for mortgage fraud, Sichenzia realizes he’s part of the current problem. And when he got out, the opportunity to get right back into the game that had put him in prison immediately presented itself. “I had many, many people who I had made money for,” he said in a recent interview from his Florida office, where Sichenzia now works at keeping people in their homes, or finding the financially feasible ways for them to gracefully leave.
“Ninety-five percent of what I did before I went to prison was legal,” he continued. “And I could have gone back to being a vulture investor, picking at the carcasses that I know were going to be there. I was well aware what the foreclosure world was going to look like before this pandemic. But that’s not where I want to be, I help a lot of people now who have no voice, and I guess it’s really ironic that I’ve become their voice.”
Prior to his incarceration, Sichenzia described himself as “a real opportunist.”
“I made a lot of money from the most despicable situations. But I learned we have a responsibility to our fellow man. There’s a fine line between manipulation and a fair trade in business, and I make sure what I do now comes down on the side of fair trade and not manipulation.”
As he considers the President’s new plan, Sichenzia contends that it is not the institutional banks that are the biggest impediment to solving the problem. Today, he says, it’s the servicers and the investors who are part of the problem.
“An irresponsible borrower is still going to pay a price – in money and a loss of their credit,” Sichenzia said. “But there are also many borrowers who never should have never received these loans – people who are losing their homes after 40, 50, 60 years… These are individuals who do need help, and won’t get it under the President’s plan. And many people who are going to get loan modifications under this new Obama plan don’t deserve them.”
He admits, however, that the President’s plan is not designed to help every person. So upon his release, Sichenzia set himself about the task of becoming an advocate for the individual homeowner – tapping into everything he learned before and during his four-year stretch.
“I used to originate and sell mortgages in the secondary market. I did a lot of them that were crooked and fraudulent, and I got caught and I got nailed for fraud in the sale of securities by the New York Attorney General’s Office,” Sichenzia explained.
He and others like him would take advantage of the gap in information between the appraised values of properties and the details made available on loan applications. “A sharp operator could easily manipulate the value assumption and analysis of the loans that were originated, as well as the viability of the borrowers, just by selling to the right institutions – the ones that would just buy paper without doing any due diligence.”
While incarcerated, Sichenzia first served as a one-man law library clerk in a population of over 1,500 inmates. “Every day I worked trying to solve problems for people who had no voice. I worked harder in prison than I ever worked in the real world.”
He was then re-assigned as a grievance clerk, where he honed new skills working the dispute resolution process within the New York State corrections system. “Now that I’m out, I used what I learned every day to dissolve or resolve the disputes between individuals and their lenders,” Sichenzia said.
He believes that even those who are not covered under the President’s program deserve help – individuals who have a job, but just need a monthly payment that is not outside their reach.
“They just need to learn to present themselves properly to their bank, and they need to be proactive about getting help,” he said. “They need to go at their bank from an educated perspective – knowing how the bank is looking at them. We don’t look at the loan mod in isolation; we look at the overall debt ratio. Some people are probably better off in bankruptcy.”
Unfortunately, the current law doesn’t allow banks to speak about loan modification with individuals who are filing for bankruptcy. “When we get reform, we’ll have a real stick to use against these banks. The way the code is being interpreted since 2005 is counterproductive, it has precipitated more bankruptcy foreclosures, not lessened them,” Sichenzia said.
If the black Suburban pulled up to his office, and the President got out and asked how to solve the problem, Sichenzia says he would demand the law force servicers to negotiate in good faith, and enter into modifications whenever possible. And make it the law that judges could cram back original loans when lenders don’t negotiate in good faith.
“That way, lenders would become investors,” he said, “and would see it in their material long term best interest to modify loans if there is a threat a judge could cram down their principal. Letting the ’05 bankruptcy code interpretation change the playing field by giving any secured lender an upper hand in the negotiating process is wrong.”