Follow the Money, a wise man once said...

Is there any industry that touches the average consumer that is conflicted as the mortgage and housing markets? There are so many side deals, so many incentives and bonuses paid if a party can deliver the customer — and ideally, deliver a customer who will pay more than they really should be paying (think “yield spreads”…).

Now comes this series in The Charlotte Observer about how a marketing firm that set up a storefront to help serve as a one-stop shopping center for buyers looking for a home. The Observer — which is also the newspaper that broke the story on how Beazer Homes had built, and also financed via subprime mortgages, new subdivisions where the homes were largely in foreclosure — reports that the firm, Realty Place, did not adequately disclose to many homebuyers that it was receiving not just the standard broker’s commission but also a bonus when its customers bought homes from certain homebuilders. The founder of Realty Place, John Heinemann (pictured), told the Observer that he didn’t know his agents were supposed to tell customers—at least verbally—that his firm was receiving bonuses from builders, but that the disclosure was made in the settlement forms, as was also required by law.

There’s a tie-in to Beazer in this affair. As the Observer notes:

Beazer became Realty Place’s largest client. Between 2002 and 2005, more than 420 Realty Place customers bought Beazer homes.

In turn, Realty Place records show Beazer paid the company more than $2.2 million, including about $700,000 in bonuses.

On average, Beazer paid Realty Place 3.9 percent of the sales price in commission and bonus, compared with Realty Place’s overall average of 3.4 percent. In 2003, real estate agents in the Southeast averaged 2.7 percent of the sales price, according to REAL Trends, a Colorado data firm.

After Congress and other policymakers are done with helping homeowners stave off foreclosure—a questionable gesture, in my book—it should force a serious rethink of disclosure laws in mortgages, in contracts with builders. In short, every piece of paper involved in buying a house or refinancing a mortgage. Because right now, there is no disclosure. And when there is, it’s buried so deep you need an oil rig to find it. And the public is paying for it—in excess fees and now, in foreclosures that cost them their equity and their savings.

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