lying on your behalf - that's a new (old) one

[acroyear]

I, Cringely . The Pulpit . Independence Day | PBS:

The theme of disintermediation -- of eliminating middlemen -- has been a driving force in the Internet for as long as commerce has been allowed on the web. But what happens when the middleman you just eliminated had as one of his or her jobs the task of keeping us from being ripped off?

Tasks that are harder to accomplish are also less likely to be foolishly accomplished, which is why so few of us make trips to Nigeria.

That's not the way we are supposed to view things, of course. Ideally the Internet as a research tool is supposed to give us all the information we need in order to resist any allure the Internet has as a tool of fraud or misadventure. But this attitude ignores many of the fundamental forces at work in most sales situations where the simple fact is that we want to buy, the seller wants to sell, and so any countervailing forces are purely voluntary, which is to say often nonexistent.

Take our current national economic mess, the so-called sub-prime mortgage crisis. I like to think that I'm not a subprime kind of guy, but pretending to work as I do (my kids think I TYPE for a living) the world may not always see me the way I would like to be seen. So last year, in what we didn't know were the waning and idyllic pre-subprime days, I tried to get a new mortgage. Of course I used the Internet to get the loan because, as we all know, when banks compete I win. And within a few days, without having to actually meet with or even speak to another human, I found myself offered a $336,000 mortgage.

It was SO easy. Fill out a few online forms, make some choices, and there I was, about to close that loan. But then I did an odd thing. I carefully read the papers I was about to sign (I'm one of THOSE people). And in that residential loan application, right on line something or other, was a number that didn't make any sense to me at all. It was labeled "total household income" and was almost twice the pitiful amount I actually earn.

From where did that number come? It certainly never came from me. Since my signature would be at the bottom of this application I wanted to make sure everything was correct, so I called the mortgage broker. For the first time we spoke. She was a very nice lady, too, and explained that number was the variable required for all the ratios to be correct so I could qualify for the loan.

"But it isn't true," I said.

"Do you want the loan or not?" she asked.

Not.

I wasn't so principled as cowardly, but maybe that doesn't matter: I did what I knew was the right thing for me, which was to walk away from the loan. But evidently a lot of other people took the other course and today are having trouble paying for their houses, which is a big part of the reason why we are in this current economic mess.

Comments

[javasaurus.livejournal.com]

Pet peeve:
But what happens when the middleman you just eliminated had as one of his or her jobs the task of keeping us from being ripped off?

This is one of the problems of bypassing the FDA and buying pharmaceuticals on the internet, often from other countries.

[cyberkender.livejournal.com]

It doesn't help in the slightest that he only eliminated one of many middlemen. A huge part of the problem is how loans like this get used. The loan company that Cringley was dealing with was just the first guy. They'd go and sell the loan to someone else, and then it would probably go into a loan fund that investors buy up, and so on. The real problem is that at each stage of this chain, the middleman is paid for his services and not held accountable thereafter.

[acroyear70.livejournal.com]

actually, he does continue on in that vein, as do others like Mark at good math bad math. the problem with any middleman comes when the "customer" is reversed.

originally a middleman was like a retailer - providing tested and approved local services and goods to the customer and giving that confidence that comes from being able to easily return it or talk about it. In the case of loans, the middleman at the local bank or broker level was the friendly face that answers questions and helps guide you to the right loan for your lifestyle.

now, that role has changed. the middle man, like the tv network, isn't there to supply product to customers. he is there to provide aggregated products to the suppliers - the consolidated loans all safely verified for maximum profitability to the buyer, just like the network's real job is to provide maximum eyeballs to advertisers.

in advertising, where it really doesn't work on 85-95% of the population, the network has learned to lie, learned to fudge the numbers and play the game, the game called "sweeps week", where artificially inflated ratings are used to set budgets and prices - fooling the customer on BOTH ends. it's a game that all sides play along with, in spite of the fact that it is utterly built on the lies of the middleman.

so too, the loan market, where artificially "assured" loans are sold to the fools on both ends - the loanees gets money they can't afford, the real buyers get sold a product that make "junk bonds" look appetizing. the game of lies of middlemen again.