Stripped Bare - Beneath the Feel Good Veneer of Subprime Lending

Chapter 6 - Boiler Room Marketing

As I previously mentioned in Chapter 4, Bombardment of Easy Dollars, one of the most profitable marketing methods for subprime lenders was telemarketing to their own current customers (mortgagees).  The least expensive method of accomplishing this was simply for subprime lenders to utilize their own account executives as not only account executives, but as the telemarketers, and subprime lenders developed their own telemarketing methods which were almost textbook boiler room for their account executives.

Boiler room techniques have been described as high pressure sales, where as many sales people as possible are crammed into one space, and hundreds of phone calls per day are made to prospective clients.  Additionally, many boiler room sales operations randomly record many of the calls made to prospective clients, and, the performance of each telemarketer is closely monitored.  Just as was done in the subprime lending industry.  Two of the most closely monitored performance keys, in the subprime lending industry, were the number of calls made per day by each account executive, and, did the account executive follow the prescribed script.  If an individual account executive fell short on the number of prescribed calls per day, or failed to follow the script, dismissal was sure to closely follow.

Though many individuals associate boiler room techniques with the fraudulent sale of securities, the sale of subprime loans to less than credit worthy borrowers was by no means fraudulent.  Neither was the making of phone call, after phone call, after phone call, in search of a sale, fraudulent.  In fact, nothing about subprime lending, in and of itself, was fraudulent, though individual account executives working within the subprime lending industry could be prone to utilizing less than scrupulous practices to make a deal.

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