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NAMB calls House passage of HR 3915 a victory for consumers and small business: Warns Title III provisions will harm consumers

Nov 18, 2007

A letter to the editor ...Doug VairoBlame for sub-prime mortgage crisis In the article titled "NAMB condemns blame shifting by MBA President: '06-'07 President Dinham calls on mortgage originators to help protect consumers," it appears that National Association of Mortgage Brokers Immediate Past President Harry Dinham, CMC takes great offense to the comments made by John Robbins, CMB, president of the Mortgage Bankers Association. Although I come from the broker side of the business, both Robbins and Dinham make valid points. Here are a few excerpts from that article: • "Robbins states that some of the factors contributing to the recent turmoil in the sub-prime marketplace, and some of Robbins' targets—the mortgage broker, unethical and misleading brokers, and the lack of licensing in the mortgage broker profession. 'We need to once again identify the problem: unethical people,' said Robbins. 'Who made this mess? The short-term folks. People who get a commission when the deal happens. For them, it's the number of loans that counts. Good loan? Bad loan? Who cares? For them it's about the commission.'" • Robbins goes on to say, "Frankly, it's too easy to hang a shingle and call yourself an expert in mortgages." I could not agree more. He goes on to say, "We need licensing of brokers, with a threshold that will weed out those unwilling to be responsible, to be held accountable. Some cross the line into pure fraud, and for them we have laws." Again, who could argue with that? Dinham feels that Robbins is trying to shift blame totally to brokers, and while he may be right about that, Dinham is wrong to try to shift the blame to Wall Street. The problems with the sub-prime market are not entirely on the shoulders of any one group. Everyone has a finger in this mess. Some groups may share a larger portion of the blame, but in the end, they are all at fault. Robbins is 100 percent accurate when he says that there are unethical brokers and loan officers in this industry and that some "cross the line into fraud." I agree that there are unethical people in this business and that there are also those who have not only crossed over to the fraudulent side, but seem to have set up camp. What I take offense to is the same thing that Dinham does—that the entire fault lies on the broker side, which is simply not true. There are many loan officers who work in banks and push the envelope, as well as unethical appraisers, real estate agents, etc. They both agree, however, that there needs to be better licensing in place. I could not agree more, and there is a simple solution to this mess: One federal license! Currently, there are about 25 states that have instituted loan officer licensing, and that's a good thing. The problem, however, is that each state has its own guidelines for training, and many 15-year veterans in the business are getting punch drunk going to all these similar classes for different states. Some states require as little as eight hours of "whatever" training with no test, all the way up the line to Maryland, which requires a full 40 hours of live training. The problem with Maryland, though, is that the test is not administered through the state, and is, therefore, suspect. North Carolina and Illinois, on the other hand, have strict testing policies, but only have eight hours of training! There is no one set of standards in place at this time, and that is a bad thing. I do believe that the one standard will happen, but in my opinion, it can't happen fast enough. As I travel around the country training loan officers of all levels, I am amazed at how few really understand the products they sell. In my opinion, less than five percent can explain an option adjustable-rate mortgage (ARM) correctly, or any ARM for that matter. To this day, most of the new loan officers hear this statement on their first day: "Here's your desk and here's your phone, now get outta my face and bring me a loan!" No training at all except for something to this effect: "Sell this product because we make the most money on it and say this to the borrower." Furthermore, many loan officers are not really sure if option ARMs and stated loans are good products or bad products. When I poll loan officers, it usually breaks down like this: 40 percent say they are bad products, 40 percent say they are good products, 15 percent just don't give a damn and the remaining five percent get it right when they say, "It depends!" Yes, it depends on the borrower being matched to the correct product and then using the product correctly. Putting the borrower in a stated deal is not the problem. The problem is stating an income that is way out of line to artificially qualify the borrower. If the products were used as intended, there would be a lot fewer foreclosures. Many loan officers are either afraid to fully inform their borrowers or just plain don't know what to say because they themselves are not trained properly. It's not earning a commission that is the problem, it's untrained, unethical loan officers with no accountability. The only solution lies in the standard training and one license similar to the series 7 and series 63 that stockbrokers take or even to the extent of a test similar to an attorney's bar exam. That may seem harsh, but look at it this way: If a loan officer wants to earn professional money, they need to be trained like a professional and also be held to the highest ethical standards that other professional are. This license would apply to all loan officers, regardless of whom they work for—no exemptions because you work for a national bank or other exempt organization. NAMB, along with the MBA and other related mortgage groups, needs to push for this unified standard. I believe that we are headed in that direction, but it's always good to give them a push. If you agree with one license and tough testing standards for all loan officers, please feel free to send me an e-mail. You can find my e-mail address on my Web site at Doug Vairo, CEO
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