A report from the Seattle Times. "Former Washington Huskies football player Scott Greenlaw led the mortgage company he founded to dizzying heights, 400 employees, a sprawling new headquarters and kegs of beer at staff meetings. Now he's selling his house to avoid bankruptcy as creditors line up with lawsuits."

"The sudden demise in May of one of Washington's largest mortgage brokerages has left a trail of angry ex-employees, expensive lawsuits, unpaid taxes and government investigations."

"Greenlaw was one of many mortgage-business newcomers who saw gold in doing refinances. His target clients: tarnished borrowers whose credit problems qualified them only for expensive, and highly profitable, subprime loans."

"The problem with much of mortgage lending, Greenlaw told the Business Journal, was that loan officers lacked sufficient training and accountability. 'You could be selling shoes yesterday and making loans tomorrow,' he said in a 2004 interview."

"Some loan officers, including Kerrie Saulness, came to Merit with years of loan experience. However, many had none and got their jobs by word of mouth along the Eastside club scene's grapevine. The lure was fast money."

"Merit did put loan officers through a 19-step program. 'Loan Officer 101' was 15 minutes long, as was 'Mortgage Glossary.' Thirty minutes were devoted to '10 Step Loan Flow.'"

"Saulness wasn't impressed. She sat next to two 18-year-old loan officers. 'They didn't even know how to read a credit report,' she said."

"Former loan officer Nick Barry said wryly that many 'had no idea what product they were selling, but they knew how much money they could make.'"

"Merit employees proudly posted their résumés, plus photos of their luxury cars and drinking parties, on various Web sites. One loan officer had come to work fresh from being a Hooters Girl. Another solicited clients for two endeavors: writing mortgages for Merit and selling marijuana paraphernalia on the side."

"Indeed, several Merit loan officers boasted online that doing drugs was a favorite pastime. 'Let's get hopped up and make some bad decisions,' wrote one beside a photo of himself grinning broadly."

"Former employees also said Merit regularly provided a keg of beer for some staff meetings, but Greenlaw said that, no, it was actually two kegs, and employees were free to bring in six-packs on Fridays. Asked about rumors of drug use in the office, Greenlaw said, 'We just never checked.'"

"When interest rates rose and the lucrative refinance business slowed significantly, Greenlaw gambled that he could increase revenue by adding loan officers who could complete more complex loans. That didn't work, and the overhead sank him, he said."

"Was it really that simple? Pressed, Greenlaw admitted it wasn't. 'Buybacks were high,' Greenlaw said, without giving details."

"In other words, Merit's loan officers executed mortgages that were so flawed that the investors who bought the loans from Merit forced them to buy them back. A longtime broker not affiliated with Merit said such buybacks are 'extremely rare.' 'It will bankrupt most mortgage brokers because most don't have the resources to pay off a loan that is purchased by a lender and bounces back,' the broker said."

"Ordered to complete a loan for an elderly homeowner who was incapable of understanding it, Loan officer Sunny Hoppe said she refused. 'Merit's whole attitude was, 'Get the deal,' Hoppe said."

"Saulness said she also tangled with her boss. 'It was highly promoted that you overcharged the customer because they're subprime and they deserve it,' Saulness said."

From Lew Sichelman. "Home buyers who bite on houses that come with free vacations, cars or other sales incentives may be surprised to find out, sometimes too late, that the places they want are not worth what they thought."

"In the eyes of lenders, these and the dozens of other 'concessions' sellers are dangling in front of potential buyers have a dollar value that should be accounted for by the appraiser, if not deducted outright from the selling price, when determining the true market value of the property."

"If the appraiser is aware of the concession, he'll make the adjustment accordingly. But if he somehow misses the incentive, the lender ends up 'mispricing' the loan for the risk involved. That's the last thing any lender wants. But 'it happens all the time,' according to Douglas Vincent, a collateral and appraisal risk expert in Plano, Texas, with 20 years experience in the field."