Faith Lost: Predatory Lending Story

Faith Lost, Perceptions Changed: How the banking world needs to recover the confidence of the people after mass allegations of predatory lending and other banking malpractices

The events leading up the to the Great Recession of 2008 have been of great debate to the general public, congress and policy makers. Some have tried to place the blame on the banks; others on the regulators emplaced to prevent economic disasters, and some have been absolutely clueless to where and how their money had almost vanished into thin air. Millions of Americans saw their homes foreclosed; their mortgages ravished, their stocks valueless almost overnight, and many more lost jobs they had spent years at.  Swarms of people turned their heads, and looked for someone to point their fingers at, but no one was to be found, their brokers like their money and homes had vanished like some mystical mirage. Unfortunately, this is not the case, and for the majority of Americans, this money did not disappear in some miraculous magic trick, but instead was strategically exploited from them by a banking system that had grown fat and greedy off subprime mortgages, and the process of predatory lending.

Predatory lending is an enigma to the general public, due in part to the fact that there are no legal definitions in the United States on the subject. However, the FDIC has broadly defined predatory lending in an audit report written by their inspector general as, “imposing unfair and abusive loan terms on borrowers.”  The lack of acknowledgement on behalf of the government is startling, considering the fact that predatory lending claims have been on the rise. According to NERA Economic Consulting, predatory lending claims are up 55.56% since 2003, a possible sign that government needs to play a much bigger role in home loans. In fact, when the economic costs are quantified into real numbers, the issue becomes of even bigger concern, as estimates point that U.S. borrowers lose $9.1 billion annually to predatory lending practices.

Yet there has not been legislation related to predatory lending since 2003. While the Dodd-Frank Wall Street Reform and Consumer Protection Act passed in July 2010 included “Subtitle G – Mortgage Resolution and Modification,” the bill provided only general guidelines, instead of a closer and decisive plan to eliminate predatory lending. The closet thing that legislators have come to a concrete bill has come from U.S Representative, Stephen Fincher (R-Frog Jump) who has recently introduced the Preserving Access to Manufactured Housing Act.

Faith Lost

But, this new piece of legislation is too little too late for Americans like Roberta Green, who has had first hand experiences with predatory lending and the manipulative practices of certain bankers.  In an article written by Jeanette Bradley and Peter Skillem of the National Housing Institute, they demonstrate how Greene’s story can be precautionary tale for all Americans.

According to the NHI, Green who is a North Carolina local, had just been laid off a job at a resident telephone company that she had invested 29 years at. Struggling with bills, she took up a job as school bus driver. But it wasn’t enough.

Enter American Mortgage Service Company, who according to their website, “helps individuals realize the dream of home ownership by working with a reputable, honest and family based company.” However the man who dealt with Green was none of those qualities.

Like a magician utilizes smoke and mirror to draw the attention of his audience elsewhere, this particular mortgage broker through some sleight of hand and false hopes of a better life was able to draw Greene away from the fact that she was being hopelessly exploited.

The American Mortgage broker would slide in paperwork in the last minute to get Greene to sign it, he would promise home improvement, better prices, and more savings. But instead he would actually refinance her existing mortgage at a higher interest rate.  By the time he had finished his work and left Greene weeks later, she had acquired a check for $1,900. What she really had gained was a loan for $76,500 that refinanced her entire mortgage at a higher rate. Her monthly payments jumped from $500 to $740 a month, and after building up $23,00 of equity in her home, the refinancing reduced that number to $2,000.

At the end of the day, the loan broker walked away with a $3,500 commission, the lender bagged $13,900, while the credit insurance company received $3,000. But, these numbers are dwarfed by the estimated $40,000 that secondary markets earned.

This is where predatory lending gets complicated. Financial institutions, such as American Mortgage Service Company often sell existing loans, similar to Greene’s, to secondary markets. These secondary markets then bundle these loans and sell them to insurance companies, pension plans and mutual funds. With the addition of prepayment penalties, subprime loans become costly to refinance, and consumers are often stuck with high interest plans. This makes it easier for financial institutions to sell these loans to secondary markets, because they have the reassurance that consumers will not refinance due to the high penalties.

While this has allowed more people to buy the houses they want, it has created a chain of securities that is based off the month-to-month mortgage payments that the same consumers they exploited have to pay.  When people cannot pay their mortgages this chain begins to collapse, and the whole system starts to implode. Continued manipulation of consumers have led to the housing bubble burst observed in 2008, and without further government checks on the financial sector who knows what will happen.

The Road Back 

But banks continue to grow, and one particular North Carolina bank has many analysts feeling optimistic about the US banking sector since the recession. Bank of America is a Charlotte based multinational banking and financial services corporation, which has promised consumers a better, more equitable home lending experience. Senior Vice President of Corporate Communications, Kris Yamamoto has said that Bank of America taken the initiative to aid with the education of all their consumers, in the hopes to win over some faith lost during the 2008 recession.

Along with Bank of America’s “Home Loan Guide,” that is aimed to “provide potential homebuyers with tips on down payments, mortgages, refinancing and home equity options,” Yamamoto also said that they have partnered with the Khan Academy. The academy, created by Bangladeshi educator and MIT graduate, Salman Khan, is  a non-profit that aims to provide free, quality education through various internet platforms.  The two organizations have come together with the hope of developing a new self-paced, easy-to-understand website that will further aid and educate consumers.

According to Yamamoto, the new website,  “” attempts to take the complicated financial topics, and put them into plain, “easy to understand information” that consumers can access easily and at their own pace.

However, Bank of America has not always been the stalwart defender of the people, and the financial goliath has been in a string of lawsuits over the past years, many regarding predatory lending. According to Money MSN business journalist, Jonathan Berr, the culmination of these lawsuits, paired with arguments with regulators have led to a $10 billion legal settlement with Fannie Mae, with similar smaller deals between more than a dozen banks and regulators. Nonetheless, many of the problems that have surfaced, have seemed to parallel the banks acquirement of Countrywide Financial, the notorious home loaner that has been tainted with accusations of fraud and malpractice since 2005.

Though Yamamoto promises that Bank of America Home Loans (previously Countrywide Financial) is a completely different organization that has a zero-tolerance for predatory lending, it hard to believe that consumers will begin trusting banks with the same level of faith that they did before the 2008 recession. If consumers do regain faith, it will be a lengthy process where the banks will need to demonstrate transparency, and most importantly win the confidence of the people through educational programs such as “”

Of course, the work cannot stop at a website, and banks need to continue to improve their image and change this perception of greedy banker, to the safe keeper of the people’s wealth and trust – and that will take time.


Home foreclosures & Repossessions

CEO Salary Breakdown

Revenue & Net Income

Month by Month Stock Tracking – Bank of America


Kris Yamamoto, Bank of America:, NERO Economic Consulting, National Housing Institute


Jeff Mackenzie: Fat Frogg & Pandora Pie’s Owner

Ribbet, Ribbet: How a man, a bar, and an idea stirred up Elon


The frog is an interesting animal, it is of course an amphibian that spends its early life in the water, only to later grow feet and legs and join the creatures of the land. Jeff Mackenzie, who started out in the textile screen-printing industry, before hopping off to greener lily pads in the construction industry and finally landing in the restaurant business, is an example of a man who has successfully created a business that has adapted to suit the needs of two very different customers. Just how different are these customer bases? Well considering one side is a rowdy group of college kids and the other a family-focused community, they could be polar opposites.


Mackenzie, who is currently 58, was born in Rochester, N.H. and moved down to Norfolk, Va. at a young age, before finally settling in N.C. Upon graduating from Elon University in 1977, Mackenzie had played four years of football at center, become a brother of Kappa Psi Nu (now Kappa Alpha Order) and had begun actively pursuing a career in the textile screen-printing industry.


While his tenure as an old-school graphic designer was short, Mackenzie moved on from the screen-printing industry, due to the harsh reactions the chemicals had on his skins.


“Regulation was not the same back then, and in 1998 I sold my shares in the company and decided to do a little construction work, specifically stone work,” he said.


With the money he earned from selling his shares, Mackenzie began investing in real estate. One particular investment led him towards a piece of property just outside of Elon University. Mackenzie claims that he had been trying to get into the restaurant business for a while, and when the opportunity presented itself he seized it, calling up an old-time friend in an effort to break ground as soon as possible.


Looking at the inside of the Fat Frogg it is hard to imagine that this was all once just a piece of barren land. The colorful, festive decorations that line the rafters in the bar and grill create a laid-back atmosphere that both college students and families can enjoy. But not so long ago, the Fat Frogg struggled to draw any sort of crowd.


Mackenzie’s strict protocol of not allowing underage drinking in the bar, sent underclassmen storming back to their dorms and generated uproar in the much of the study body who were shocked to see their fake ID’s stripped from them.


His vision was of a restaurant that attempted to bridge the differences between the university and its neighboring town. Burlington, which only about 5-miles away from Elon’s campus, represents a drastically different kind of socio-economic picture than the university, and has struggled as a whole to regain its confidence after the textile mils that generated most of the business shut down.


In contrast, Elon, which is touted by many observers as one of the nation’s most beautiful campuses has attracted a mainly upper-middle class student body, a lot of which come from a hotbed of private schools across the Northeast.


It has been the vision of Mackenzie to create a place that, families can come and enjoy and their Sunday brunch, while still being able to cater to the younger crowds. Mackenzie said that is has not always been easy balancing the sometimes drastically different audiences, and that it something that he has to work on constantly.


“Sometimes people will come in after church and just want tea and coffee. I remember once the lacrosse team had joined us this particular Sunday. After a few drinks, they began acting rowdy. My manager, Pete who is a much younger man than I asked that if I could go over and talk to them. I walked over and put my arms around about four of them and asked them to simply… “look around”. Needless to say, they quieted down and many of them came to apologize to me later,” Mackenzie said.


However, Mackenzie says that these differences, while may sometime prove problematic are what makes The Fat Frogg unique. Attempting to stay with the theme of diversity, The Frogg has attempted to hire employees from different backgrounds, pulling from various Greek organizations and sports teams at Elon University, while also recruiting from the surrounding towns and cities.


Due to the nature of the industry, the majority of employees that Mackenzie hires are part-timers, and are often students at Elon University. In fact, 22 out of the 30 total employees working at The Fat Frogg are part-time employees, and do not receive any healthcare benefits. While N.C. giant, Lowe’s Home Improvement has established the precedent of slashing full-time employees in favor of part-timers in a scheme to reduce costs, Mackenzie has stayed relatively unaffected by this trend and still has roughly same the amount of full-time and part-time employees he had when he started the company.


But, the true heart and soul of any good restaurant’s operation is the kitchen, and Mackenzie says that out of his 8 full-time employees, almost all of them work in the kitchen.


“We have to keep it fresh, and the food is the most important thing. If the food is not up to par, than the whole business suffers,” he said.


And kept it fresh they have. Introducing promotions that have seen the Fat Frogg packed to capacity, and bouncing as ever. The most recent of which was there St. Paddy’s Day Celebration, in which traditional Irish food was offered as well as a range of dark ales and ciders.


And while the Fat Frogg also offers a wide range of liquor, it was not that long ago that liquor by the drink was illegal in the town of Elon.


Before the liquor by the drink law was passed two years ago, Elon bars and restaurants served strictly beer and wine beverages. Mackenzie, who was tired of losing customers who were searching for something a little stronger in their drink, decided that enough is enough and in 2008 he mobilized the surrounding merchants in an attempt to pass liquor by the drink.


“My friend’s wives don’t life beer, they wanted a mixed drink – they weren’t the only ones.  So we were losing business to competition over the ban on liquor by the drink,” said Mackenzie regarding the liquor by the drink legislation.


Previously, the law had not been brought up for debate for over 40 years and Mackenzie thought it was due time that the town of Elon should be able to serve liquor in bars and restaurants.  However, he wanted to ensure that he had the blessings of both the university and the police department before he advanced.


He got their blessings, and after a lengthy two-year process liquor by the drink was finally legal in the city of Elon. But the restaurant business is not all glitz and glory.


“It’s a grind,” said Mackenzie, who often works 10:30 – 5:30 a.m. during bar nights and weekends. With all the hustle, toil and problems associated with running a restaurant, let alone a bar and grill in a college town, Mackenzie does not seem phased by any of it.


“Exit strategy? I don’t think we have one,” he said, attempting to hide a sheepish grin.


And according to Mackenzie’s reports of their earnings from their past few years, they have been doing steadily better and better. In fact, based on the first three months he says that they are doing close to 20% better than they did last year, and what’s great is that the business stands to grow even more as the university and the surrounding areas experience positive growth.


So the next time you’re in Elon sipping on a gin and tonic or an ice-cold Margarita, take a second and thank Jeff Mackenzie, or better yet drop by The Fat Frogg and thank the man in person.


It would appear that after years of leaping around, this Fat Frogg has settled, and even in the off chance that bad ‘weather’ may roll in, it can be safely assumed that this frog will endure the storm and come out just fine.



2009 Timberline Station Dr. Elon, NC 27244

Jeff Mackenzie: 336.269.1060








Catching Up – Some interesting articles from the WSJ

Samsung Flexes Immense Android Device Dominance, Worries Google

Samsung Sparks Anxiety at Google

For me personally there are two kinds of phones: Samsung’s Galaxy series and the IPhone legacy. While naysayers may argue that HTC or Motorola are developing phones of the same caliber at more economical prices, one cannot argue the fact that Samsung and Apple control an amazing 64.7% market share of worldwide mobile phones. What this basically means, are that 1 in 4 people who own a mobile phone (globally) will either have a Samsung or an IPhone. In fact, they would probably have a Samsung.

Google executives who have noted that the majority of their mobile phone and tablet profits are attributed to Samsung product sales have begun to worry that the South Korean multinational will use their influence to their advantage.  Their Android software, which is basically carried by Samsung phones and tablets generates, has allowed Google to place their own apps directly on all products going out in the market.  Apps such as the Google web-search engine, Google maps and even YouTube all serve as avenues that generate massive amounts of revenue for Google, and Samsung have finally decided that they want a bigger slice of the cake.

In what some have noted as a direct move to eliminate this possible dilemma, Google have recently acquired Motorola Mobility- a manufacturer of Android-based smartphones and tablets While, Google maintain that they will not “play favorites” when distributing new software, it is hard to imagine that Motorola will not benefit from this acquisition.

Samsung have refused to comment on Google’s new purchase, and appear to be holding their cards close to their chest. However rumors suggest that they have been working on their own software system that would potentially eliminate their need of Google’s Android system. Regardless, this chess match between techno-juggernauts is undoubtedly only to going to get more interesting, and I cannot wait to see what Apple will have to say about all of this.




Internet Gambling Scores Its Biggest Win –

No Fix for Housing Finance