Whose Fault Is This?

As the housing downturn continues, the blame game is only getting started.

Yesterday the National Association of Home Builders reported handing over just 774,000 sets of new house keys in 2007, a 26 percent drop from 2006, which is the biggest decrease in at least four decades. Forecasters see the continuing weak sales and high inventory as signs that the market for residential real estate is unlikely to turn around soon. Next week a Congressional committee will question Countrywide CEO Angelo Mozilo, whom the New York Post has called "the public face of the subprime mortgage mess." Up until last week Mozilo was set to receive a $75 million "golden parachute"  (i.e., severance package), when Bank of America completed its $4.1 billion buyout of Countrywide. But on Monday Mozilo voluntarily agreed to significantly pare down his windfall by giving up lucrative consulting fees and perks like golf club memberships and corporate jet travel. He'll still receive $37.5 million.

Mozilo's lifestyle has little in common with that of Steinunn Seay, an operations manager for a mortgage lender in Kenosha, Wis. But Seay and Mozilo share a couple of things in common: they both make a living helping Americans borrow to buy homes, and they both feel tarnished by the mortgage crisis that's been front-page news for nearly six months now.

Seay is not a mortgage broker, and she has never earned a commission by selling a loan. Instead, she's one of the many thousands of support staffers who work behind the scenes, processing the paper, cutting the checks and dotting the i's on those giant stacks of mortgage documents we all tend to sign without reading whenever we refinance.

The number of people working in these jobs multiplied over the last decade. More Americans were buying homes, and existing homeowners became increasingly accustomed to refinancing whenever interest rates dipped, requiring more manpower inside mortgage companies. In January 2000 total employment in the real estate credit and brokerage sectors totaled 298,000, according to the Bureau of Labor Statistics. By October 2005—the height of the real estate boom—that number peaked at 504,000. By last November it had dropped by 22 percent, to 392,000.

Seay has felt this pain. She began working in a mortgage office right out of high school, in 1992. Over the years she advanced and changed jobs, eventually earning as much as $65,000 a year as a statewide operations manager. Just a year ago, if she'd wanted to change jobs she would have had her choice of offers, she says. But last August her employer suddenly closed, a victim of the mortgage crunch. She found a new job within a week, but her new employer doesn't offer the generous bonuses she earned before. As a result her income has dropped by half. With two kids to support, she has pulled her nine-year-old daughter out of horseback riding lessons and has postponed plans to enroll her four-year-old in ballet class.

While the drop in income has hurt, Seay sounds just as upset by the vitriol she reads in news accounts and on blogs, which seem to blame everyone associated with the mortgage industry for this mess. "A lot of us are being stereotyped as crooks, but some of us still wake up in the morning and truly enjoy helping people," Seay says. "I, personally, never went into this business because I thought I could make a million dollars." Unlike some of the big lenders making headlines, Seay's employers did little business in subprime loans, mostly lending money to folks with average credit scores.

Make no mistake: there are plenty of folks besides Mozilo who made big money in recent years. Consider Mortgage Master Inc., the Massachusetts-based mortgage broker that I've used when buying and refinancing my home. According to a 2003 Wall Street Journal story on the firm, five Mortgage Master brokers earned more than a million dollars a year at the height of the boom, and no broker who worked the entire year earned less than $100,000. "These days [mortgage] brokers are racking up fees that rival Wall Street's 1990s windfalls," reported the Journal's John Hechinger, whose story introduced readers to a former truck driver who was pulling in $470,000 a year by answering his phone and filling in mortgage applications for people like me who wanted to refinance.

Seay missed out on those windfalls partly because she didn't want to move into a commissions-only sales position. She expresses no regret over that decision. She also realizes many mortgage professionals have it far worse than she does—at least she found a new job. Still, she thinks the public should show a bit more sympathy.

"There are a lot of us out here who have suffered financially, [and] we're not all crooks … Some of us are really good people who were trying to make a living," says Seay, who still gets a small thrill helping first-time homebuyers attain their piece of the American dream. Even amid finger-pointing and negative headlines, Seay says she can still look in the mirror in the morning and know that she made a positive difference for people trying to buy a home.

It's a sentiment worth keeping in mind as the bright lights of a congressional hearing room shine on Angelo Mozilo next week.