Out of all of Donald Trump’s business blunders, Trump Mortgage LLC was among the shortest-lived and most ill-conceived.
Launched in 2006 just as trouble was looming for the housing market, the business lasted just 18 months and crashed alongside the market in 2008. Its spectacular downward spiral mirrored unreasonably lofty goals: $3 billion worth of loans during the first year in business and $100 billion within a decade, according to Bloomberg.
“Trump picked about the worst time to jump into mortgage lending, waiting close to the tail end of the boom,” said Cliff Rossi, a finance professor at the University of Maryland, who cited warning signs that others in the market saw as early as 2006.
According to Bloomberg, Trump Mortgage did not make loans itself but “collected fees for being a middleman” by brokering commercial and residential mortgages along with home equity loans.
Trump and his executives repeatedly dismissed concerns of a housing market bubble. “How you react to the so-called housing bubble can be a barometer of your business personality,” the GOP presidential candidate wrote in a blog post on the website for Trump University in 2005. In 2006, Trump Mortgage CEO E.J. Ridings told Bloomberg TV it was “extremely likely” the mortgage company would broker $100 billion in loans in five to 10 years.
However by 2007, when the business was failing, Trump told Crain’s he merely licensed his name to the mortgage business, and described it as a business he never “particularly liked or wanted to be part of in a very big way.”
Following Trump Mortgage’s collapse, at least one broker, Jennifer McGovern, sued the company for $238,000 in commission on a $26.5 million commercial loan. She recalled how the real estate mogul would come into the office and root for a housing market collapse. “Then people like me would go in and buy,” Trump said, according to a recording made for Trump University.
McGovern — who was offered $10,000 by Trump Mortgage — was ultimately awarded some $300,000 by a judge in 2009. By then, however, Trump Mortgage had no assets, office or even a working telephone number. [Bloomberg] — E.B. Solomont