A
couple of weeks ago the commentary raised the issue of LICENSING. Below are
some note regarding licensing:
"I
am still wondering what the thought process is with the CFPB's lack of
enforcement requiring Loan Officers with bank owned mortgage companies becoming
licensed. As a regional manager, I have interviewed LO candidates who
failed their test or background checks for licensing and then they walk down
the street to a bank owned lender and go to work. So how does working for
a bank lender make an LO a better qualified LO? But the more important
question I have for the leaders of bank owned mortgage companies; if your
bank is committed to providing the best trained loan officers in the mortgage
business why doesn't your bank require your LOs to pass the licensing test, and
the same background requirements that each state requires to become licensed?
Why does a government agency have to mandate or make it a regulation for a bank
lender to require LO testing if they truly want to provide their customers with
the most ethical, knowledgeable and best trained loan offers? All Realtors have
to be licensed and all appraisers have to be licensed, so what is the thinking
with excluding loan officers with depository lenders? The issues that
brought about Dodd Frank and the CFPB were not restricted to just
non-depository lenders; the bank lenders were right in the middle of it
too. I think we all want a level playing field and the goal should be to
provide the most ethical and knowledgeable loan officer so our consumers are
protected! The CFPB is supposed to be all about protecting the consumer;
not protecting the banks."
[Editor's
note: banks, and bank employees, have their own set of rules, background
checks, testing, and so on. And they will often argue that their standards are
higher than a mortgage banks. But you do bring up a great point, and Dave
Stevens, in a speech two days ago, mentioned that reconciling
business-specific LO discrepancies is on the MBA's agenda for 2014. So stay
tuned!]
I
received a plethora of comments on both sides of this issue. Originators know
that the opportunity to take Stand-Alone UST ends on
March 31. The Stand-Alone UST is an adaptation of the NMLS National Test that
is now accepted by 39 different state agencies. Taking the UST is highly
recommended for any current licensee who might ever be licensed in another
state.
Now
that the dust has settled...
"I
keep seeing mortgage bankers and brokers crying 'not fair' about the big bank
LOs not having to be licensed. If fairness is the issue, isn't it a good thing
that they don't have to be licensed? Isn't that one of the biggest pitches
against using a big bank - that the LOs are 'lesser' LOs because they aren't
licensed for one reason or another? It seems to me that helping improve the
qualifications of your competitor is a bit counterproductive. Of course, if the
idea is to improve the mortgage industry as whole, then I get it."
Kevin
Igoe with the Community Home Lenders Association writes, "This has been a
major issue for the Community Home Lenders Association and we have worked
aggressively to level the playing field. Our members are committed to bringing
about fairness in the manner in which non-banks are treated in all aspects of
the regulatory process."
And
this note from Robert Eustis, CMB: "The Bureau is charged by Dodd Frank
with 'ensuring that bank loan officers have training commensurate with their
duties'. We know of no objective standard other than the Multi State Test,
UST, that could show that the Bureau has accomplished its mission as set out by
the law. The CFPB should promulgate a regulation requiring bank loan officers
to take and pass the UST. That would be an easy way to achieve two goals: #1
that the Bureau has fully complied with the law, and #2 that non-bank lenders
would play on a level playing field."
"The
write-up stating it is not a fair market to have bank LOs not having to take a
test is somewhat annoying. From the beginning LOs at banks have been tested and
audited by and on RESPA, ECOA, TILA, etc. etc. and they are audited by FDIC
(and insured by which no broker is), OCC, and every other regulatory agency. A
broker shop is only audited by the state Office of Financial Institutions which
often only audits minimal things and has very limited power. I personally had a
broker shop that had a LO that committed fraud by created VODs and VOEs with my
company, Chase, and National City and the next year my local OFI gave the LO a
license to open her own business. When we called to find out how this could be
we were told that OFI does not have the right to deny a license for this
reason. Bank LOs are held to a much higher standard and audited 10x's more than
any broker shop. If we all want to play on an equal playing field then I think
we should also all be audited by every regulatory agency. I can guarantee
you most brokers in the market would not pass 1/3 of those audits. I get so
frustrated when I focus on learning every regulation and train my LOs how to
stay compliant and a broker owned mortgage company walks in and sells to my
clients they do not have to do any of it. Until the CFPB was created there was
no one really auditing much out there on the broker side. I've been on both
sides, it's not the same and honestly I doubt it ever will be unless broker
shops want to be audited on every aspect of their business like a bank
is."
"I
certainly agree with your question of the CFPB's lack of enforcement on LOs with
a bank. I tried 8 months ago switching to contracting my business through a
national bank from a state licensed mortgage company. I passed a credit check
and a background check but, nothing to compare with renewing my state licenses
for Kansas and Missouri respectively through NMLS. I only stayed with them for
two months because of other issues within the organization, which by the way
took government bailout funds. I went back to my state mortgage company. I have
to question the validity of an organization that cannot even police its own
lending policies being qualified to employee LOs that they hire with such lax
standards. Certainly double standards apply. I was a conventional banker for 29
years before entering the mortgage business so, I know how they work. Most are
certainly handled by responsible leaders."
"The
CFPB had told the industry it was not interested in re-opening the SAFE Act.
Why, is simple. HUD was given the SAFE Act initially and HUD is exempt from the
RFA. I was on a state broker board and wanted LOs licensed, and at the time I
was also a registered rep with NASD. I fashioned it off of that platform. I was
fearful of a bifurcated system like they had in Florida at the time. Ruth
Faynor was the lead at getting the Florida system proposed but the big banks
opposed it. It the end they came up with the dual system. And we saw the
results. I know a copy of my paper went to a member of AArmR. Not claiming it
was my idea. But in the original paper I wrote it was for a single platform
anything less is disparate treatment. HUD said it wouldn't have an impact on
small businesses because it was just on the LO. We all know that's a joke -
even worse when you fill out the Call Reports. The CFPB's rules, on their face,
consistently favor larger institutions at the expense of smaller companies. I
do not know where SBA Advocacy has been. In 2007 they issued a study that said
regulations cost small businesses $10,575 per employee. I cannot even fathom
what that number is today when you account for Dodd Frank and Obamacare."
Joe
A. observes, "Regarding licensing, I am now at a community bank. But in
prior years I ran my own company as a lender and broker so I feel I know both
sides of the issue. Even though I am not required I keep my license in place
but recognize the intense requirements of the banks for training their loan
officers. However, it does not put the pressure on to the extent that brokers
or non-bank lenders feel when they have to take the test. But let's be real for
one minute. The true difference here is that the banks are involved in a
constant month to month training curriculum. Most brokers and lenders wait to
the last minute, take an online course (which is the same thing over and over,
and applies to all players no matter how many years they have been in the
business), and they move on until the next required test a year later. Both
approaches accomplish pretty much the same except for the NMLS and State tests
that 'require' you to take the test. You don't pass a test at the bank level and
there's really no penalty. You don't pass it at the NMLS or state level and
you're cooked."
Finally,
Dave Stevens with the MBA contributes, "As a matter of fact, it's the
MBA that voted, and is advocating, to amend the SAFE Act and require LO testing
and licensing for all loan originators regardless of business model. It's
really important that lenders read our advocacy plans & comment letters
before making statements that are simply incorrect. No organization has been as
firm on equality for all lenders than the MBA. At the state level we often
encounter groups that couldn't vote to support testing for all LOs because the
boards were divided with big banks on their board. The difference was that we
had a unanimous vote in favor of this because I called personally the CEOs of
each big bank telling them what obligation they had as citizens of the mortgage
system to promote equity and fairness. Again, our vote was unanimous and we had
Wells, BofA, and the other large institutions, along with IMBs and community
banks, all support it with no one opposed. This takes work and lenders have an
obligation to know what is being worked on and not just assume with zero fact
checking. A fractured industry because of people like this will absolutely lose
the policy war."
Switching
gears, changing tacks, "and now for something completely different, Mike
Ousley, president of Direct Valuations, warns lenders, "In the rush to
comply with the CFPB Ability to Repay (ATR) and Qualified Mortgage (QM) rules
on January 10th, many may have overlooked the CFPB rules in conjunction with
Equal Credit Opportunity Act (ECOA) Regulation B Valuation Rule, effective
January 18, 2014. The CFPB has published this handy guide for consumers to use
to protect themselves. So, along with the appraisal report, ANY commonly
used reports, such as AVMs or even potentially the Submission Summary Report
(SSR) provided by Freddie Mac through the
Uniform Collateral Data Portal (UCDP) which includes its Home Value Estimator
(HVE) Automated Valuation is required
to be supplied to the borrower promptly, or three days prior to loan closing,
whichever is earlier. My questions is how are lenders prepared to
deliver these valuations to the borrower (Lenders using the Direct Valuation Solutions
fulfillment platform succeed seamlessly through its automated, secure delivery
mechanism) and for the potential questions from consumers, not just on the
appraisal, but also any other valuations used in conjunction with making (or
declining) a loan?"
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