An old friend and I work for two different mortgage loan companies. A few days ago, she told me her conscience has been bothering her about her work, and we started comparing notes.
When these companies make a conditional commitment for a loan, they guarantee the interest rate for as long as two months. When rates go up during that time, the companies make little or no profit on loans they must make at the locked-in, lower rate. For that reason, when a rate increase is announced, the companies want to delay as many closings as they can until the deadline for the guarantee has passed.
My friend’s company is straightforward about delaying closings. One way is to demand a reappraisal—several grounds are mentioned in the fine print of the loan commitment. Another way is to remove from the file and shred one of the harder-to-get required verifications—for instance, one explaining why previous employment ended or showing that a third party’s error affected the applicant’s credit rating. When the file is checked just before the time set for the closing, it is “found” to be incomplete, and the borrower is asked to supply the missing item. The delay usually means a rescheduled closing at the higher rate.
Every borrower also is assigned to someone in the office and told to contact him or her about any questions. When the company wishes to delay loans, the contact person never is available, questions aren’t answered, and the borrowers often make mistakes that delay things. Those who call repeatedly or ask to speak with a supervisor get excuses and are told their contact person will call back in a day or so. The contact person waits two days, then takes steps not to reach the borrower—for example, calling his or her home during working hours and leaving a message.
Subtler methods are used where I work. We are not told to remove anything from a file or deceive people. But when an increase is announced, we are required to double check all pending files to make sure each borrower has done everything perfectly. Even the smallest question must be resolved before the loan is made. If there is any gap in the information or a missing verification, or if names and dates do not match up perfectly, we notify the borrower by mail rather than telephone, as we normally would. Preparing the letter usually takes one working day, but when we are busy it can take longer, and then the letter is in the mail a day or two and sometimes more. The letter explains what the problem is and tells the borrower what to do. But it does not mention that failure to act promptly could delay closing beyond the deadline for the locked-in rate. A surprising percentage of people who get such letters ignore them entirely or delay too long in answering, and some get the problem only partly cleared up, requiring another letter and more delay.
My friend and I both deal with borrowers. She finds it very hard being a contact person. People often get angry and act as if the delays were her fault. She cannot explain what is going on and must tell fibs to cover up. Since they don’t have the same system where I work, I don’t find talking with borrowers particularly unpleasant. But we both feel sorry for people who get loans at a higher rate than they had locked in. Over the mortgage’s term, the difference usually adds up to thousands of dollars of additional interest. Still, we need our jobs, though she needs hers more than I need mine. (I used to be the girl Friday for a real estate broker who has several offices in the area, and he has offered me a job as office manager across town at slightly better pay than I now get. But the work would be harder and the commute longer.)
Can we continue doing as we are told so that we can keep our jobs? Or should I change jobs and must my friend start looking for something else?
This question concerns cooperation in fraud. Plainly, the company at which the friend works is gravely violating its promises and defrauding borrowers. Her work involves wrongs—of lying and destroying items in applicant’s files—that surely constitute grave matter. She should repent those acts at once, amend her life, and somehow fairly contribute to the restitution due those she has helped defraud. The company at which the questioner works uses procedures each of which could be chosen as means to a legitimate end. But since they are chosen precisely as ways of delaying closings, this company’s intent also is to defraud borrowers, but the questioner probably need not cooperate formally. Still, even material cooperation can be wrong, and the questioner almost certainly should change jobs.
A conditional commitment to make a mortgage loan at a guaranteed rate is, morally speaking, a promise. In exchange, applicants pay an application fee; relying on the promise, they seldom seek funding elsewhere. Nevertheless, under certain conditions, anticipated by neither party, a mortgage company might break its promise without injustice—for example, if there were an economic crisis and interest rates suddenly doubled, so that fulfilling loan commitments would be ruinous. When rates increase within normal expectations, however, intentionally delaying closings to avoid making loans at the guaranteed rate deprives borrowers of precisely what they bargained for.330 Therefore, in trying to delay closings, both companies intend to defraud borrowers, and, morally speaking, when they succeed they steal the extra interest from borrowers.
Apparently wishing to avoid legal liability for its fraudulent practices, your employer limits its delaying tactics to procedures each of which might be used without wrongful intent. Carefully scrutinizing applications and insisting on every detail might be a way of screening out weak or fraudulent applications. It might be cheaper or more effective, though usually slower, to send borrowers letters about problems than to make telephone calls. But any such purposes would be just as relevant when rates are holding steady as when they are rising. So, using these procedures only in the latter circumstance manifests fraudulent intent. Supposing the extra interest imposed on borrowers to be the same, the injustice of the theft is no less than if your employer used the grosser delaying tactics of your friend’s company.
Your employer’s delaying tactics are such that you can do as you are told without personally doing anything inherently wrong. Though your work contributes to the company’s fraud, you need not share its bad intention—to delay closings and defraud borrowers—but can intend simply to earn your pay by applying rules, detecting problems, drafting letters, and so forth.
Even such involvement in another’s wrongdoing can be immoral, however, because it can lead to sharing bad intentions, lead others into sin, impair one’s witness to relevant moral truth, and/or be unfair to those injured by the wrongdoing to which it contributes. Your superiors do not direct you and others to remove anything from a file or lie to people, but they make their purpose clear. An employee who wanted to please them might well be tempted, not simply to follow instructions, but to find new ways of delaying closings, thus sharing management’s wrongful intention and its guilt for the injustice being done to borrowers. Moreover, even if you do not give in to that temptation, you hardly can openly criticize what management is doing and warn your fellow employees against sharing manage~ment’s wrongful intention. Your apparently complacent participation might lead those who regard you as a good person to rationalize wholehearted cooperation. And put yourself in the place of borrowers. Wouldn’t you think someone in your position—aware of the injustice and able to change jobs rather easily—should make some effort to stop the fraud?
Your friend’s moral situation is even worse. She intentionally wrongs borrowers in lying to them and destroying items in their files. Someone might argue that she need not intend to delay closings, but could be doing as she is told just to keep her job, so that her lying and destruction of documents might be only light matter. But I doubt that she can do her job without intending, at least in some cases, to delay the closing. And even if she could, an injustice is not light matter unless a reasonable person suffering it would regard it as negligible (see LCL, 319–20). Hardly any defrauded borrower would consider the injury done him or her by your friend’s wrongful acts negligible, since they substantially contribute to her employer’s fraud.
Besides, even if she could follow orders without precisely intending to defraud borrowers, she could not justify accepting any of the bad effects of her acts which, being morally wrong, cannot themselves be justified. These bad effects include not only the injustice to the borrowers but likely bad consequences of the kinds, already described, resulting from your contribution to your employer’s subtler methods. Indeed, some of those consequences are even more likely to follow from your friend’s participation in her employer’s wrongdoing. She is more likely than you to begin sharing her employer’s intention to delay closings, if she has not already. And her involvement is more likely than yours to encourage others, not least her superiors, to rationalize their wrongdoing. Then too—though she might need a lawyer’s advice on this point—her own acts perhaps violate laws or governmental regulations. If so, disobeying those laws or regulations almost certainly is grave matter.
I think these considerations make it clear that both of you ought to change jobs. In any case, your friend must never again cooperate in her employer’s fraud by doing anything that can be done only with wrongful intent. If either of you think talking with your employer about the fraudulent practices might lead the company either to assign you to other, morally acceptable work or to reform its practices, you should consider that approach. But I assume both of you either will not find it feasible or will not succeed in getting your employers to do either thing.
Perhaps interest rates have not risen recently, so that neither you nor your friend is currently involved in fraudulent practices. In that case, you have some time to look for other jobs. But if your friend currently is involved, prospective hardships, no matter how great, cannot justify continuing the wrongdoing even for one day—even for a minute. I trust she will understand and accept her responsibility to desist at once, since she manifested her concern to avoid sin by telling you her conscience has been bothering her.
Even if your employer is currently engaged in its fraudulent practices, your moral situation is not as bad as your friend’s. You may have done nothing wrong or, if you have, you might be able to repent without at once changing jobs. But unless you consider it worthwhile to talk with your employer, I see no reason to delay in accepting the other job available to you, even though it is less desirable in some respects.
Besides changing jobs, you and your friend should try to rectify the injustices in which you have participated. Her obligation is more definite and greater than yours. Having personally wronged borrowers, she ought to contribute to the restitution to which they are entitled—probably by helping them obtain it, but perhaps by paying her fair share of it. Moreover, her employer’s fraud, being easier to prove, is more likely to be redressed by legal processes. Both of you may need legal advice. But three possible approaches, not necessarily mutually exclusive, seem worth considering. First, you might—and your friend, given her duty to make restitution, probably should—communicate directly with borrowers who have been recent victims of the fraud, and offer to testify in court if called upon to do so. Second, both of you could present your information about the fraudulent practices to the state’s attorney and/or some other public official, if there is one, responsible for regulating the mortgage loan business. Third, you could make the information available to local news media, and perhaps even let them identify you. The latter course would include public repentance of your involvement. It would be quite painful, but it might bring the fraud to an end and lead to rectification of past wrongs. And it would bear credible witness to the relevant moral truth.
330. And what they will pay for—the points and rate specified in the loan commitment include a hedge adequate to cover the risk of an increase in the interest rate; see Stephen R. Rigsbee et al., “Pricing for Profits,” Mortgage Banking, 52:5 (Feb. 1992): 65–71.