The importance of a good credit beginning

NAMB Board shares its vision for the future ... Board roundtable addresses the present and looks beyond 2007MortgagePress.comNAMB, George Hanzimanolis, Marc Savitt, Jim Pair, Kate Crawford, John Porter, Harry Dinham, Roy DeLoach The Mortgage Press recently had the opportunity to sit down with the National Association of Mortgage Brokers 2007-2008 Officers and Executive Vice President at the NAMB 2007 Annual Convention & Exposition, NAMB Reigns in Seattle to discuss past accomplishments and current issues, as well as to highlight plans for the future. Coming off its first year of self-management, NAMB has added several staffers with rich governmental experience, including the recent addition of John Sepulveda as senior vice president of operations. And through the recent roller-coaster ride of the industry, as well as the turmoil in the sub-prime market, NAMB has been there, steadfast in its support of the Mortgage Broker industry. In attendance for the roundtable discussion was President George Hanzimanolis, CRMS; President-Elect Marc Savitt; Vice President Jim Pair, CMC; Secretary Kate Crawford, CRMS; Treasurer John Porter; Immediate Past President Harry Dinham, CMC; and Executive Vice President Roy DeLoach. The Mortgage Press: George, what do you envision to be the main challenges facing the Mortgage Broker as we enter the second half of 2007 and beyond, and what is the latest on RESPA reform? George Hanzimanolis: With the concerns of RESPA reform, there are a number of bills floating around and we want to make sure we keep in mind the value of what Mortgage Brokers do as RESPA reform is considered. We want to ensure an even playing fieldthat brokers are treated just like any other segment of the market. I look at the fact that every single year, more than 50 percent of all of the loans originated in the United States are by brokers. Brokers are the ones the consumer wants to keep going to, and thats why our numbers keep climbing. Harry Dinham: One of the biggest challenges we face today is the issue of fraud. I suggest, and even though were not fond of the Conference of State Banking Supervisors (CSBS) registry model, would be a registry for all originators that would have everybody in it, no matter who they work for. They would pay to be in this registry, and we would use some of those funds for enforcement and some of the funds for financial literacy. If you have a company that finds a broker who may have committed fraud, that company might put the broker on their list, but wont share that list with everybody. It really should be a fixed list where every fraudulent loan originator is on it and if you do something wrong, you should be thrown out of the business. I think its vital to our industry that we try to help the situation with fraud because its tearing up our business. TMP: How is NAMB positioned to respond to those challenges? Roy DeLoach: Its what NAMBs leadership has been saying for two to three years now & consumers are confused with the formsthe disclosure of yield-spread premiums confuses consumers, and thats actually been validated just recently by the Federal Trade Commission [FTC] in not one, but two studies. The more recent study says that the best way for consumers to shop is to come boil the Good Faith Estimate [GFE] down to a small amount of digestible information for consumers so they can easily shop from broker, to banker, to credit union and make a decision on their own about what kind of loan they want. Marc Savitt: We had a meeting with the U.S. Department of Housing and Urban Development a few years ago, before this FTC study came out, noting that the forms were confusing. A couple of years ago, the FHA said that with certain forms, there could be confusion to consumers regarding the YSP and that this confusion could cost consumers in upwards of $800 million in mistakes. Im glad to see that the FTC has finally validated everything that weve been saying for a long time. TMP: You mentioned an even playing field. As far as thats concerned, that would be to have a registry system applicable to Mortgage Brokers, mortgage bankers, credit unions, anybody thats a loan originator would be a part of that registry system. Has NAMB been able to garner or are interested in trying to get the support of the Mortgage Bankers Association and the American Association of Residential Mortgage Regulators (AARMR) in addition to the CSBS? HD: Thats always been one of our biggest complaints to the CSBSthat they are only interested in putting together whats already there. If an entity is registered in a state, theyre going to put that same entity in a national registry. If an individual is registered in a state, they are going to put those individuals in there as well. Our point is that most people do business in their own state. They have to go for consumer protection through their state agencies. W need this national registry so that people cannot continue to move from one company to another because they are not required to be licensed and registered. TMP: The perception of the current mortgage crisis, which is fueled by the press and what I call many uninformed state and federal legislators, is that the culprit is the Mortgage Broker. George, how is NAMB responding to this attack? Also, how is NAMB advising its membership on how to respond to contacts with the press and when that is brought up by the consumer? GH: Ive heard Marc [Savitt] say several times, and I agree with this, that I dont think that the consumer knows the difference between a Mortgage Broker, mortgage banker and even some large lenders unless you are a chartered bank and you walk in and there are tellers behind the counter. Every other originator gets thrown into the category of the Mortgage Broker. We are trying to educate the consumers and our legislators to let them know that we are beefing up efforts on the broker side to make sure, with NAMBs Code of Ethics and Best Business Practices, that we have an even more stringent ethics and best business practices policy for them to adhere to. TMP: Is NAMB providing its members with talking points to be able to counter those who are approaching brokersreading stories from legislators that are possibly about to react hopefully not with a knee-jerk reaction to this crisis that [brokers] didnt create? Kate Crawford: We really havent been pointing a finger at anybody. We see there is a need for a solution, and when everybody calms down, then I would hope that we will all sit at the same table and try to work some things out for those who are trying to hold onto their homes. I cannot imagine that anyone who is servicing these loans wants to have them go bad. There seems to be some issues within their portfolios, so they cannot refinance some of them. We just all need to sit down and figure out a solution for these guys. MS: One of the biggest problems we have is the lack of education. I think part of our job is to educate our representatives and our senators as to not only knowing how the market works, but as to who and what a Mortgage Broker is. I would be willing to bet that the majority of the examples of brokers that Sen. Chuck Schumer has in his office are not Mortgage Brokers. At a hearing that Harry [Dinham] testified at in February, there was a consumer witness testifying before the Senate Banking Committee talking about a Mortgage Broker that had victimized her from California. I wont mention the name of the individual, but when she mentioned the name of the company, it was a mortgage lender. Theyre not Mortgage Brokers. This was at a Senate Banking Committee hearing. I think that validates everything that weve been saying all along. I think the first step is that we need to educate these individuals. The second thing is that I think people need to stop pointing fingers, and we havent been the ones doing it. TMP: One of the things that you said is a very important component in order to diffuse this crisismaking the Mortgage Broker the target. How do you intend to educate the legislators at the federal and the state level so they really understand the Mortgage Broker? Jim Pair: One of the things Ive seen as far as NAMB is concerned is its great grassroots network. I think we should think about using this network to work in our communities with our state and national legislators back homeeducating them as to what Mortgage Brokers do. I dont think we should wait until we come to our state capitals or our national capital to do the education. I think we need to do it back home with their constituents, and I think it would have a great impact on the legislators. MS: Thats a great point. If you look at most federal legislation, it takes years before its ever passed. But on a state level, it could pass within a few months because the legislature meets for 60, 90 or 120 days at the most. Just look at whats come out in the past year of this year so farjust in the first six months of 2007. TMP: People are saying, I keep hearing the Mortgage Broker is a crook, why should I do business with you? Are there any talking points that are being provided to the membership for them to be able to counter some of that? J. Pair: The Government Affairs Committee and Joe Falk hold a monthly conference call with the leadership of NAMBs state affiliatesbringing them up to date on whats happening. Were trying to keep the states involved at all times with what we are faced with on the national front. KC: I think one of the other things that weve been doing is reaching out more to the communities. We have done some consumer protection pieces which are going to be available on the NAMB Web site [www.namb.org] for Mortgage Brokers to download and use in their own communities. We have just finished our handbook on our Code of Ethics which will give the broker a guide on how to conduct their business. The NAMB Code of Ethics is about 156 words; the guide is about six or seven pagesit expands on that and gives them an idea on how a good Mortgage Broker should run their shop. TMP: In the past year, Harry, you had a lot of media exposure; is it the hope that under Georges administration, that effort will continue as far as outreaching to the media in the press, radio and TV to communicate the role of the Mortgage Broker to the media? GH: I think weve done a great job this year educating a lot of people, but the job is far from done. And we will continue to get our word out there in what we are doing. I have to say that when I look at where this association was just several years ago, compared to today, its satisfying to see that so many more segments of the media reach out to us now. Not only to accuse or to point blame, but to ask our opinions on industry related topics. The fact that they respect our expertise tells me that we are coming a long way. I look forward to continue what Harry has done, and Jim [Nabors] before him. TMP: You hear these things such as mortgage planning and so on. Do you think that the future of the Mortgage Broker as being just a loan originator is going to be changing? GH: I dont know if we necessarily need to evolve; I think we will. We see that starting to happen now where people are taking on and affiliating their business others. I think we provide such a valuable service that you see many Mortgage Brokers doing nothing but brokering and are very successful at it. We want to show the difference between the NAMB Mortgage Broker and other originators. We are in the processand its still a work in progressof creating a trust mark that we are going to be offering to our memberssomething that will go out to the consumers to tell them that this is a group of professionals who have promised to adhere to a tough Code of Ethics and promised to do business in a way that will promote honesty and integrity in mortgage lending. We will be proud to have that trust mark next to our name. That is something we will be rolling out at the NAMB 2007 Leadership & Development Conference in San Antonio in August. HD: The other thing that we are doing for the members is that we are going away from the one annual meeting model and will be hosting regional events. These regional conferences are going to feature free education, which is going to allow those people to get their credits back in their states. Jim Pair has been working on that, and I think that is a big benefit to our membership. Do you have the exact numbers, Jim, of how many people took education in Seattle compared to last years NAMB Annual Convention in Philadelphia? J. Pair: We had over 400 registered for education classes this year in Seattle. Last year in Philadelphia, we had about 40. This year, we had a waiting list on each one of our classes. Weve been accommodating more and more people. TMP: How important do you feel certification is as far as the professionalism of the NAMB member to stand out from the crowd? J. Pair: Certification is very important. It demonstrates to the consumer the professionalism that you see in yourself. It ensures the consumer that because you consider yourself a professional and are willing to get the additional information to become certified, that you hold the consumer at heart and can provide them with the information they need to make a proper decision. John Porter: Currently, I am not certified. I dont have a CMC or CRMS designation and there was a by-law change at the Delegate Council at this convention. I am now going to have to hit the books and am going to get certified if I want to continue on the NAMB Executive Board of Directors. GH: We recognize the fact that the exams for certification are not easy. They are not made to be easy. They are made to show people who the best of the best are. I give credit to Marc Savitt for the observation that they are a lot like a CPA exam. Maybe we need to consider taking these tests, the CMC or the CRMS, and breaking them down into modules much like the CPA exam is set up. That is something that we are going to be doing this year. Hopefully, it will encourage more people to take it, because I think that some are intimidated by it. We are in the process of creating new certifications, such as the Certified First-Time Homebuyer Specialist and a Certified Commercial Broker that are more specific to the needs of the consumers. I think that will be a great benefit to our members because when they put that in their Yellow Pages ad or their business card, customers want to deal with someone who is certified in a particular field. We will hopefully roll a few of those out this year, and I know Marc has even expressed an interest of pursuing that some more in his year as NAMB president. TMP: One thing I wanted to address, and we kind of have to rewind, is the whole concern with suitability and Mortgage Brokers being questioned in terms of requirements for suitability. How is NAMB prepared to deal with that as that starts to rear its ugly head? HD: Suitability has been described by several people, and you can go to the MBA, you can come to us, the problem is it is too subjective. Today, computers are really making the decisions as to whether people are approved for a loan or not. So, we really want to put the human factor back in it because there are a lot of loans out there that a computer says are fine today that I dont think are. If we start doing that, there are going to be a lot less loans made from a personal standpoint. I think thats the biggest scare with suitability. John Robbins [MBA Chairman] actually made this reference, he said if you have somebody who is a college graduate, a high school graduate and somebody that has no education at all and they all have the same credit score, are they all equally qualified? Or, do you think that the one with the highest degree of education should be more suitable to get that loan than the person who has no education at all? It depends on what the parameters are. It is going to be very hard unless they are very well defined as to what you can do because it is going to take a lot of people out of the market. RD: I think that we are moving to an interesting decision point where the moral hazard issue is coming up, where you take the decision-making out of the hands of the consumer and totally give it to some other entitythe government, a Mortgage Broker or a lenderand not have the consumer take responsibility for their economic choices. When you start taking that away, we think that that is a bad public policy and we would not be supportive of anything that would take those decisions out of the consumers hands. TMP: Are there any new initiatives that NAMB is planning to launch as far as the new administration? What would your hopes be personally, as well as collectively under the 2007-2008 administration, to walk away as your legacy for your term of office? GH: Well, I think Harry, and even Jim [Nabors] before him, set a lot of things in motion and we always say, we realize that it doesnt take a yearit takes years to make things happen. I think a lot of things that Harry and Jim have done, some of them will happen during my term, some in Marcs and even some in Jim Pairs term. One of the things I want to pay a little more attention to is, and we recognize, the fact that what happens to the smallest state affiliate that we have, impacts every other state that we have out there. I want to reach out more to the states this year; where although we cannot give them PAC funds in their state, we can go in there and teach them how to raise PAC funds, how to host fundraisers, how to properly lobby, and run better state conventions. I dont want to use the term Big Brother, because we are there if they want it. We dont want to take over any states. We dont want to tell them what to do. But we want to reach out our hands and build more of a bridge between each state by pooling together our resources. J. Porter: An example is the credit freeze bill that was going across the country which started in California. I just picked up the phone and called past NAMB Board member Ginny Ferguson in California when I found out from the lobbyist in my home state of Washington that there was something about some credit freeze going on. He thought that this wasnt going to affect Mortgage Brokers, but I said, Wait a minute. This is probably the thing that will affect us the most. Hes our lobbyist, well-instructed on whats going on in the mortgage industry, and I said, Oh no, no. Let me look at that bill. And because of Ginny Ferguson, we were able to include a clause that totally watered down the bill that did go through our state capital in Olympia, Wash. Without that friendly amendment, it would have impacted the mortgage industry in our state tremendously. I know that credit freeze bill did get through, unfortunately, in several states because they didnt have a lobbyist to warn them. Once it goes through one state, it seems like the Finance Committee of several states will pick up on the same bill, or a consumer advocate or an attorney will push it to other states. TMP: Is there any advice that you could give Mortgage Brokers as they look to the future in terms of what NAMB feels the future holds out for the survivors as we get into what I dont regard as a declining origination economy, but a normal origination economy that we are headed to? KC: Ive been through three or four cycles and the main thing that you have to do is not lose touch with your main contacts and referral sources. Sometimes, when you get busy with your refinance market, you forget where your true business is coming fromthe real estate agent or from the for sale by owner. But you lose sight of either the purchase market or the refinance market. You have to constantly work at your business and cannot take it for granted. You also must do your due diligence to stay in business. Make sure that your employees are doing the correct thing; otherwise, get rid of them, because all a Mortgage Broker has is their reputation. And if that reputation is soiled because of some bad apple in your company, then you need to get rid of them and do a [public relations] campaign for your company. HD: In every boom and bust, there are always the survivors. The key is always to be diversified in what you are doing and the products that you are offering. Dont ever get pigeonholed into one product. Dont worry about doing refinances all the time. You need to do some sales and have a diverse product line as well. As Kate said, you want to be sure you work your referral sources because they are your lifeblood in this business. Ive said for yearsif you are not doing 50 percent of your business from referrals, youre going to be out of business soon. You just need to continue down that path of diversification.