Mortgage Predators: Less Talk, More Action

We may be a long way from the right solutions to avoid another mortgage meltdown. But one thing officials can do now is prosecute those who have engaged in unlawful activities.

And when I say prosecute I don't mean handing out civil penalties that do little to discourage dishonest brokers, lenders and loan officers. I mean criminal prosecution. We should treat the individuals who jeopardize people's homes the same way we treat a thug or burglar.

After all, we are talking about the people who work directly with borrowers, many of whom are now having trouble with their mortgages. And the news about all these bad loan deals doesn't seem to be subsiding anytime soon.

Check out Lenders Swamped by Delinquent Mortgages (Apr. 23) by Washington Post staff writer Dina ElBoghdady. Seven out of 10 homeowners have no plan of action for their troubled loans. As a result, lenders are having a hard time keeping up with the number of borrowers with delinquent payments.

As I wrote in Sunday's column, criminal prosecution certainly beats a recommendation by the government to set up yet another commission to address the ills in the part of the mortgage industry that's responsible for arranging loans.

The column was a follow up to an ongoing investigation I've been conducting of two companies, CashFlow Strategies and Financial Independence Group. Maryland's Division of Financial Regulation ordered Frederick C. Lee Jr. founder of Financial Independence Group, or FIG, to stop all mortgage-related business after discovering that Lee and his company were originating loans in Maryland without a license. The state's cease and desist order would also bar people working for CashFlow from arranging loans. Why? Because CashFlow is just the new name for FIG according to company documents and sources.

The response to my Sunday column has been swift. There are a lot of people who also want to see tougher judgment for the people responsible for causing the current mortgage meltdown. Here is what some readers had to say:

Bob Spangler from Middletown, VA wrote: "I have been hoping someone would call for tough action. But, there is the need to go after the financial institutions that feed off the sharks and the regulators that have dropped the ball for their own gain or look the other way."

"Both state and federal regulators respond to the real problems by simply sticking more pieces of paper in front of everyone involved in the process instead of 'sticking' the bad apples in jail," wrote Philip B. Posner, who says he's a real estate attorney in Massachusetts.

Finally Maryland resident Ellen Lux sums up nicely why we have this mortgage mess. She writes: "I have been in the mortgage broker business for over ten years. I've own[ed] a mortgage company for the past five years. The problem with this mortgage loan business that got completely out of hand was the greed of the banks and their investors. Not to exclude some mortgage brokers that would let and hire any mortgage loan officer that can bring in a big profit from a loan no matter how he did it. It still comes from the banks. Every mortgage loan has to be approved from the underwriter of the lender."

Amen to that.

If you want to see an example of the truck-size holes in lenders' and brokers' efforts to spot unlicensed loan officers, read the latest installment in my investigation.

To read more about my investigation, check out:

A 400 Percent Return In 7 Days? Riiiight (Aug. 26)

A Mortgage Is for Paying Off (Aug. 30)

Some Mortgage Originators Skip State Licensing (Sept. 9)

Maryland Tells Unlicensed Mortgage Firm To Shut Down (Sept. 16)

The Get-Rich Pitch, Then the Letdown (Oct. 14)

If you've been to a CashFlow Strategies or Financial Independence marketing presentation or had a loan arranged by someone working for either of these companies, I want to hear about your experience. E-mail me at colorofmoney@washpost.com. Put "CashFlow" or "FIG" in the subject line.

If you live in Maryland and closed a loan with anyone working with either CashFlow or Financial Independence, contact Maryland's Financial Regulation Division at 888-784-0136 and ask for Stephen Prozeralik, director of enforcement. Prozeralik can review your loan paperwork. That's something I would definitely do if I obtained a loan arranged by these companies. My reporting found that many of their loan officers were not licensed. You can also e-mail Prozeralik at sprozeralik@dllr.state.md.us.

Dough on the Rise

Within the past few months, the cost of a bag of flour has more than doubled, forcing retailers to raise prices on pasta, pizza, pastries, bagels and bread.

Any food that includes wheat as an ingredient is likely to cost more reports Washington Post staff writer Dan Morgan in the third installment of the Washington Post's five-part series on the rising cost of food. Morgan writes that wheat is being squeezed from all sides. Many farmers are replacing America's "amber waves of grain" with hardier and more profitable fields of corn. Droughts and poor wheat harvests in the U.S. and abroad have pushed the price of wheat up. And the U.S. dollar has slumped to historic lows against the Euro and other currencies, encouraging foreign countries to buy wheat on the cheap in America where their money now goes further. Read more about why your morning bagel will cost more in Emptying the Breadbasket (Apr. 29).

Also check out today's installment in the series, Clipping, Scrimping, Saving by Washington Post staff writer Jane Black. Black writes about how families are coping with rising grocery store prices by clipping more coupons, foregoing organic and brand-name products and buying items on sale. Shoppers are also combining errands to save on gas and shopping at supercenters like Wal-Mart and Target, where they can buy everything they need at once.

Black will be chatting about her article on washingtonpost.com at noon today. Sign on to tell her how you're coping with rising prices.

Brawl For Your Bread and Butter

Taking unpaid leave for a new baby or because Dad's sick? The Family and Medical Leave Act ensures you'll have a job when you return.

But the Bush Administration wants to make revisions to the 15-year-old law. They include advance notice of non-emergency leave and allowing employers to contact healthcare providers who approve time off. Many workers rely on FMLA because their employers do not provide paid sick leave or disability coverage. Read Take Two on Time Off (Apr. 24) by Washington Post staff writer Nancy Trejos for details of the proposed changes and the impact they could have.

What if you find out that a co-worker with the same skills as you is being paid more for the same duties? Can you sue? Well, it all depends on your timing. You have six months from the original act of discrimination to file. Not fair, say Democrats sponsoring the Lilly Ledbetter Fair Pay Act, named for Lilly Ledbetter, a female supervisor at an Alabama Goodyear tire plant who tried to sue her employer for years of unequal pay. The Supreme Court ruled against her last spring, saying Ledbetter could not sue because she filed her complaint years after the discrimination had occurred. The new legislation would restart the clock with each discriminatory paycheck, writes Washington Post staff writer Lori Montgomery in White House Threatens to Veto Discrimination Bill (Apr. 23). Also see the op-ed piece Fair Pay, Fair Play (Apr. 23).

Green to the Extreme

In Ask Amy (Apr. 23), a reader complains about the frugality of his sweetheart Anabel. Not only is she cheap, but she's very conscious of her impact on the environment. He writes "If we get coffee at Starbucks, she'll bring her own mug and take wads of napkins and sugar packets home to use later. If we go out to eat, she brings her own containers to box the leftovers...When we go out to dinner, she always asks what everyone is getting so that she can order something comparable in price. That way, when we split the bill, she won't feel as if she's getting ripped off."

Amy commends the girlfriend's penny-pinching efforts and suggests the writer embrace some of her practices.

I agree, except I don't endorse taking more napkins or sugar packets than you need. Take too much and you're really stealing.

Still are this woman's penny-pinching strategies too extreme? Tell me what you think. Send an e-mail to colorofmoney@washpost.com. Put "Green to the Extreme" in the subject line.

Small Change, Big Return

In Teens Can Contribute Summer-Job Money to a Roth (Apr. 25), Kiplinger contributing editor Kimberly Lankford gives a teen some tips on how to invest summer earnings in a Roth IRA. Lankford writes:

* In order to open a Roth, you need earned income from a job. But where you work doesn't matter. Small jobs like baby-sitting, lifeguarding, or newspaper delivery would all qualify.

* You can contribute all of your summer earnings -- up to a maximum of $5,000 in 2008 -- any time throughout the year and up until April 15, 2009, next year's tax day.

Share this with your teenager. He or she may be surprised by how those summer earnings can multiply over time through the wonders of compound interest.

A Tale of Two College Choices

I was just riveted by the story of high-school senior James Watkins and his decision about which college to attend. It came down to money.

Will he be going to his first-choice, the historically black university Clark Atlanta University in Georgia, which has yet to offer him any aid?

Or did Watkins choose Bates College in rural Maine, which offered him a substantial aid package -- $49,000 a year, an amount that would cover almost all of the school's annual $51,000 for tuition, room and board.

I'm not going to tell you which choice he made. You'll have to read Washington Post staff writer Theola Labbe's Time's Up on Multiple-Choice Test for College (May 1).

I couldn't wait to get to the end to see what this kid decided.

If you want to know where I would stand if my kid had such a choice, read my column Study Up on College Loans Before Learning About Debt the Hard Way (Apr. 24).

Wanted: Financial Diarists

The Washington Post Magazine is looking for people willing to keep (and share with the reading public a one-week journal detailing all their out-of-pocket spending. You'll have to be willing to share some basic financial information such as your salary and housing costs.

If interested, please email 20071@washpost.com. Put in the subject line "Money Diary" and please include your name, age and a little statement about where you think you spend your cash.

Surviving the Economy

Last week, I asked you for tips on how to stay financially prudent in these tough times. Here's what you said:

"I've really been just trying to stay out of the stores, only going when I really have to, after we have consumed almost everything in the kitchen. If there is peanut butter/jelly and bread, I'm not going. I also take a lot of coupons. I've started cooking one meal for dinner and everyone has to eat it or go to bed hungry/no sidebar cooking" said Tabatha L. Burley of Bethesda, Md.

Rebecca Jackson says, "I've taken my SUV, for the most part, off the road...I have a 90-mile round trip commute to work Monday through Friday. My husband is fortunate -- his commute is very short. We both drive used small cars, but they are well maintained and great on mileage compared to larger vehicles. If it weren't for my small car (a 1997 Volvo), I'd be eaten alive by gas prices because of my long commute. We live in central Virginia, where public transportation is not really an option, as it is in D.C."

Robert Siegfried of Marathon, Fla., is riding his bike everywhere. And Siegfried is looking forward to another cut -- losing weight.

Mike and Vi Eason of Lynden, Wash., say they have cut back on meat. "Probably a good thing," they write. "Last fall, we stocked up at our local farm store for potatoes, cabbage, carrots, etc. We planted fruit trees several years ago and make juice and freeze fruit for the winter months. Our yard is now a vegetable garden, the neighbors and friends love [it]. This is really fun, creative and we eat well."

"My hubby ran the figures and found it was costing him about $125 a week to drive into D.C., park, and drive home," says North Potomac, Md., resident Lezlie Crosswhite.

To cut costs hubby is going to start taking the metro.

I'm still interested in hearing how you are coping with rising prices. What are you doing to cut your household costs? Send an e-mail to colorofmoney@washpost.com. In the subject line put "Surviving the Economy."

You are welcome to e-mail comments and questions to singletarym@washpost.com. Please include your name and hometown; your comments may be used in a future column or newsletter unless otherwise requested.

Charity Brown contributed to this e-letter.