Loan volume mysteriously declining? Watch out — a conspiracy may be brewing
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A robbery could be underway in your office right now — a crime planned and executed by some of your most trusted employees. And, in all likelihood, you won’t realize it until it’s too late.
Across the country, rogue origination staff are siphoning off deals for competing lenders, turning a gushing pipeline into a tiny trickle. Then, they jump ship.
Scott D. Burke, an attorney with Kreiner Burke & Burns, calls pipeline theft “an inside job with outside help.”
“Luckily, in the mortgage business, we don’t have to worry about someone coming in with a bomb or delivering a note to steal your entire business, but pipeline theft is essentially bank robbery,” Burke said. “Pipeline theft is an opportunity to come and take hundreds, tens or millions of dollars worth of loans.”
The crime is insidious, but subtle. Burke shared a few clear signs of pipeline theft during a presentation at the Mortgage Bankers Association of New Jersey’s regional conference this week:
- Phase 1: Volume decline
Loan originations start sliding — independently of any natural ebbs and flows in business.
“There is less underwriting, fewer closed loans and then branch performance continues to decline. Then the warehouse funding starts to dry up.”
- Phase 2: First resignation
A knowledgeable, respected member of the origination staff leaves the company for a nearby competitor lender.
“They know all your tricks. They know your systems. They know what your loan pipeline looks like.”
- Phase 3: More resignations
A few more employees leave, and — surprise! — they’ve also gone to the competitor down the street.
“Pipeline theft is getting cranked up to 11. This is the part where conspiracy really begins. More often than not, branch managers will be at the heart.”
- Phase 4: Mass exodus
One day, everyone resigns, turning a thriving branch into a ghost town.
“It’s a peer pressure situation. These are the people they work with day to day; these are the people that they trust. Why not go with them?”
So what should you do if you’ve been a victim of pipeline theft? Luckily, you can take concrete steps to minimize the damages.
- Don’t beat yourself up
“Most people don’t realize this is happening. You are not alone.”
- Secure the office, files and computers
“This is going to be one of the hardest parts of the process because you may not know what files they took. You may not know which computers are missing.”
- Call an attorney
“Once this has happened, it’s not at a point where civilians can handle it anymore. Cease and desist demands have to go out to everybody. You have to start looking for witnesses”
- Follow the money
“There will always be a money trail to your competitor. The best evidence of any pipeline theft case is a check with your competitor lender’s name on it paid to one of your former employee.”
- Pursue rigorous litigation
“In civil conspiracy pipeline theft, there is fraud all over the place. It includes punitive damage – the chance to punish people who stole from you and though they would get away with it. Go all out and hold it to the end.”
