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
• "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
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
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
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
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
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 www.loanofficerstore.com.
Doug Vairo, CEO