‘Misdeeds of Trust’

I also read with interest the story of “Misdeeds of Trust” (Oct. 20) and the response to that article (Nov. 10) from Clive Hoffman of the Mortgage Brokers Institute. Hoffman implies that, since all members of his organization are licensed, they are ethical. Let me remind him of the history of the other side of the “misdeeds of trust.”

Thousands of California residents have invested in loans secured by deeds of trust (TDs) arranged by licensed mortgage brokers. I made my first TD investment in 1962 when there was a 10% cap on interest rates and TD investments were relatively safe. One company went out of business in 1973 when the principals committed fraud. After the court appointed receiver took his cut, the lenders, including me, were left to service their own loans, a task for which most were not prepared.

When the interest rate ceiling was lifted in 1980, the mortgage brokers lured investors by advertising yields of 18% or more. Competition for lenders was so fierce that loans were made based on false appraisals and false credit histories of the borrowers. The numerous failures of mortgage brokers were well reported by The Times throughout the 1980s. Although the principals of these failed companies lost little more than their real estate licenses, many investors lost their life savings.

Mortgage brokers are still advertising TD investments as safe, yet they continue to seek borrowers who have previously been rejected as uncreditworthy by banks and savings and loan associations.

Shakespeare was correct when he wrote “Neither a borrower nor a lender be.”

SOLOMON LEVIN, Los Angeles