I started writing this column to assist brokers in regaining their status as Trusted Mortgage Professionals because as a former wholesale lender, I passionately believe in the wholesale channel and want to see it succeed once more. However, the grumblings I’ve been hearing lately regarding licensing, insurance and the like have left me somewhat troubled. It’s time for me to stop being polite and start getting real.
Mortgage brokers facilitate the largest financial transaction most consumers will ever undertake, but there’s so much more to the home purchase than just numbers. Owning a home is part of the American dream. Homes are where we raise our families and make memories that last a lifetime. There is a sense of security and comfort attached to one’s home—it’s our refuge from the storm. With so much at stake for the consumer, is it really so ludicrous to demand that the agents facilitating this transaction be licensed, bonded and insured?
Think about it … you have to have a license to trade stocks or issue insurance. Want your hair colored or a drink at your local watering hole after a hard day? The professionals applying that nice shade of copper or pouring that scotch must be licensed as well.
Having a license signals to the consumer that he or she can place some measure of trust in that licensed professional because there are consequences for non-compliance with the terms and conditions of that license. In addition, a license also provides certain protections to the licensed professional, usually in the form of some recourse through the issuing entity for addressing allegations of misconduct.
Recent changes to net worth requirements have placed the bulk of responsibility for loan buybacks on the shoulders of wholesale lenders, and those lenders are going to want some means of recompense from their third-party originator (TPO) partners if a loan officer does something to damage the integrity of a loan or pool of loans. Gone are the days when, in such a case, brokers could simply declare bankruptcy and open up shop as a new origination firm. The industry is watching, and it is demanding accountability from everyone.
Brokers had it really easy in the mortgage bubble heyday. Times were good. Profits were plentiful and housing prices had nowhere to go but up. It didn’t matter that having unlicensed loan officers originating loans created increased potential for fraud, negligence and predatory lending. Even originating loans without documentation—a practice most would now agree is just plain foolish—was accepted without batting an eye. Investors were willing to take on these enormous risks because they thought the money that would be made would far exceed the cost of accepting this risk. We all know how that story turned out so why is there so much resistance to creating accountability?
It’s time to be professional. It’s time to take pride in what we do. A true Trusted Mortgage Professional views consumer protection as priority number one, and because he or she has nothing to hide, the true Trusted Mortgage Professional has no problem possessing insurance to cover acts of dishonesty and/or fraud on the part of loan officers and is happy to be licensed, tested and registered. It’s not just that it makes good business sense—it’s also the right thing to do.
Greg Schroeder is president of Comergence Compliance Monitoring. To learn more about how the Comergence Compliance Trusted Mortgage Professional program can help, call (714) 495-4720.