Need $23 Million Fast? Mortgage Queen Melissa Cohn Checks Your Credit
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The Sit-Down
Location: Last year you did $1,129,126,981 in loans, which makes you the biggest mortgage broker in the country. How is that possible during such a massive economic crisis?
Melissa Cohn: Well, 2007 happened to be probably the biggest year in real estate for New York City, and I was certainly a beneficiary of that. I mean, it was the highest-grossing year for real estate in any year that’s ever been recorded. I certainly have benefited from the increase in the value of real estate in New York City.
You’ve been No. 1 in the country seven or eight times in the last ten years.
I think I’ve been No. 1, like, 10 times in the past 12 years. I was No. 2 and No. 3 for two years.
Is there anyone that you think might catch you?
No, because I’m not stopping.
The mortgage crisis has helped cause a recession. How early did you realize that your industry was so troubled, and that those troubles could spread so wildly?
I never understood why banks got so aggressive; I never understood why banks would make 100 percent mortgages to people who don’t have sufficient credit, who don’t have sufficient income, who don’t have liquidity.
So banks are the ones to blame?
I think there are really three parties to blame. First of all, the borrowers, who knew they didn’t have enough income, who still took a mortgage that they knew they didn’t qualify for; secondly, the banks for actually approving these nonqualified buyers for financing; and then you have to blame Wall Street for making the money so readily available to the banks and wanting to gobble up the mortgage securities and encouraging more and more of these loans.
But weren’t you a facilitator? Weren’t all those mortgages a reason for your success?
No. My business has been focused on helping qualified buyers get better mortgages than they can get on their own. So the answer is no.
How easy was it for you to broker a mortgage? Is it true all you needed was a heartbeat and two legs?
No, you needed a little bit more than that. But there were banks that used to do 90 to 95 percent financing with no income verification and very little documentation. For the most part, they all stopped by the end of 2007.
When you go to dinner parties, are you shier about telling people what you do for a living—or that you’re the biggest mortgage broker in the country?
Absolutely not! Because I was not part of the problem, in terms of the subprime crisis. … I pride myself on the fact that my company never did subprime loans.
You’ve never brokered a subprime mortgage?
I mean, my company has done some subprime. But there are different types of subprime borrowers. The true subprime borrower that we read about is really someone that doesn’t have any money, doesn’t have sufficient income, doesn’t have good credit. The subprime borrower that my firm has dealt with—irregularly—has been someone who either has enough income but bad credit or has better credit but not sufficient income.
Are we going to discover in a year or two that there were mortgage problems in New York, too, and even the wealthy over-borrowed?
What happens to Wall Street with all the layoffs? That’s where we may see some foreclosure risk in New York City. There are very few foreclosures in New York City. Are there more today than there were a year ago? Yes, but not at the same level as the rest of the country.
What’s the single biggest mortgage you did last year?
I did a number of loans in the Plaza, we’ve done a number of loans in 15 Central Park West. … My biggest mortgage ever is $23 million; it’s actually this year.
These multimillionaire or billionaire buyers take out very large mortgages?
Thank God! … They like to borrow; they believe they can earn more with their money invested in their funds than by keeping it in real estate.
What kind of banks do you go to?
From the middle of the year last year, when the big money-center banks started to lose their ability to sell mortgages onto the secondary market, their rates all of a sudden became not so competitive. … Today, the banks that are the most aggressive price-wise are these smaller thrifts, the savings and loans, who don’t have big TV campaigns, and where you probably don’t do your banking.
In the late ’90s, Wall Street made it easier for buyers to get home loans, and the mortgage business evolved from small and local to a big global investment game. How did your business, which had already been around for long before, change then?
No, I think things began to change with mortgages in the ’80s, actually. … I actually went out and went to the banks, and in many ways I helped change the mortgage industry, in the sense that I went to Chemical at that time, and Chase and the different lenders, and said, ‘Why not let me make loans and have you pay me a fee, and I will do all the processing work?’
Last month, New York’s attorney general announced that mortgage brokers essentially can no longer pick real estate appraisers for their deals, which is what you and the industry have always done.
We actually don’t pick the appraisers. Every bank has its own set of approved appraisers.
But you pick one from that list.
Correct.
And that’s been a problem, because you tell the appraisers the number you’re expecting in order for your client’s mortgage to work (banks will only lend a percentage of an apartment’s appraised value), which has put pressure on appraisers. So will the new system create more integrity?
No. I think that having a bank call the appraiser to order the appraisal versus a mortgage broker making the call doesn’t really change the system. We don’t compel our appraisers to come in at a certain value, and not every appraisal works, and such is life … and I’m not completely confident that his mandate will go through because it’s damaging to the consumer.
How would it be damaging?
If I’m buying and I go to Bank A, and Bank A orders the appraisal, but then, a month later, Bank B has a better rate, then I’d have to pay for a second appraisal.
Mortgage brokers basically can no longer be affiliated with appraisers. But, for example, the appraisal firm Vanderbilt used to have you on its affiliations Web page.
We were never affiliated—we were just doing it for marketing. I have no affiliation with any appraisal company.
You and Vanderbilt were both subpoenaed. What did Attorney General Andrew Cuomo ask you?
I didn’t actually meet with Cuomo, I met with a couple of the attorneys and they just asked me some questions. It wasn’t a subpoena, I was actually asked to come in and have an informal conversation, which I did.
So what are the systemic problems with the mortgage industry?
I think that my industry has gone for too many years being unregulated, unlicensed, improperly educated. Finally, thanks to the subprime crisis, New York State and nationally, each individual mortgage broker is going to have to be licensed, and there will be background checks.
Do you see bad mortgage brokers in New York?
Absolutely, there are unscrupulous people in every industry—the mortgage brokers that pushed the subprime business, the mortgage brokers that would compel a buyer to overstate their income. It happens everywhere in the country. I’ve seen people falsify documents, pay stubs, tax returns.
Do they get caught?
Anyone that I’ve caught I’ve fired.
Is there going to be more regulation?
Up until this year, the only person in my entire company of 150 people that was required to be licensed was me personally. So now each of my individual brokers are going to have to have to have their fingerprints taken. They’re going to have to have a background check. They’re going to have to take continuing education.
You and your old mortgage broker Jeff Appel are like the real estate agents Dolly Lenz and Michael Shvo—Mr. Appel worked for you and was very successful, but then he left. When you were at the top, he was around No. 8 …
He was not No. 8, no. [Editor’s Note: He was No. 11.]
He left for a rival mortgage broker in 2005. Do you still speak to him?
I speak to him when I see him at events.
Copyright © 2008 The New York Observer. All rights reserved.
