What insanity! How can wholesalers help the broker channel survive the tsunami of regulations and ever-changing compliance? A shift in perspective is what we need. As a SAFE Act course instructor, I have a unique opportunity to speak with my friends and peers who are out there trying to figure out what the broker business model will ultimately look like. To be sure, it will continue to evolve and we won’t really know until Elizabeth Warren and her ultimate successor at the Consumer Financial Protection Bureau (CFPB), the Federal Reserve, Congress, Fannie Mae and Freddie Mac, and every other entity that has their two cents to add, is finished discussing, conducting hearings, writing and creating rules related to mortgage origination, in particular, the mortgage broker community. That’s why we need representation in Washington, D.C.
The regulatory environment we are in is unprecedented. I have been a mortgage originator since 1994 and have owned my own company since 1998. There have been more changes in the last two years than the previous 10 years. It’s hard to keep up with. Just when you think you have a system down, along come more changes. The Federal Housing Administration (FHA), Fannie Mae and Freddie Mac define the base. With fear of buybacks, lenders then take the base and create something totally different. Why you may ask … because it’s the Golden Rule. They have the gold, and our clients want it, so they get to make the rules. Fair enough. We need to be thankful for the lenders who have hung in there with the wholesale channels to provide brokers with product.
The one complaint I hear consistently in all of my classes (I teach the 20-hour SAFE course and a Connecticut Mortgage Law test prep course) is how come the brokers are taking the brunt of what everyone knows was created by the big banks and Wall Street? My answer: We didn’t have enough numbers to fight anything. “Why ?” they ask, haven’t the Realtors been called on the carpet? My answer: The National Association of Realtors (NAR).
Real estate agents need access to products. Their product is the multiple listing services (MLS) that provide information for buyers and sellers. In many states, access to the MLS is gained by membership through a local real estate board. If you don’t belong to the board or the MLS, you cannot gain access to the services needed to conduct your business. Do you know how many members NAR has? As of Aug. 31, 2010 NAR had 1,089,839 members.1 Over one million members!
Imagine a world where wholesalers required anyone selling them loans, to be a member of a professional organization in order to have access to their products, and encouraged and supported mortgage loan originator (MLO) education. Ever notice how many nationally-recognized designations are available for Realtors?
What would wholesalers gain? A better educated and more accountable broker base. Imagine a world where an educational advisory committee was comprised of wholesalers who were continually providing input on current issues and what education was needed with one constant goal: Quality originations.
If the biggest problem lenders face today is repurchases, maybe it’s time to consider prevention instead of punishment. The quality of loans is still not where it needs to be. Originators submit poorly structured loans, loans that are non-compliant, or worse, loans that are fraudulent. The solution is easy … the implementation is challenging at best, but not insurmountable.
According to FraudBlogger.com,2 fraud is up 55 percent from the first quarter of 2010 to the second quarter of 2010 … an interesting fact if true, now that banks are originating the lion’s share of the business.
“The government's push to bring mortgage fraudsters to justice is certainly welcome, but the cases brought to date represent only the tip of the iceberg in terms of how much fraud was actually committed during the real estate boom," said Ann Fulmer, vice president business relations at Interthinx. "It's sobering to know that only a small minority of cases are ever prosecuted, and it ought to serve as a reminder that the industry must protect itself by focusing on prevention."
Prevention starts with awareness. Codes of ethics, professional mindsets, education and ongoing learning, is what it takes to originate quality loans. I may be going out on a limb here, but maybe individuals who want to fly under the radar, not participate in industry efforts and only take the bare minimum to get by may be the ones that wholesalers have the trouble with. Can investing time and money to belong to an association be indicative of a propensity toward compliance and ethical behavior?
Joining state and national associations in and of itself is only a start and does not guarantee the existence of ethical behavior. However, it’s a good place to start. To encourage participation, wholesalers could strongly suggest that they want brokers who demonstrate professionalism. The more brokers, the more the associations can protect the broker channel. While we have taken the brunt of it all over the last year or two, as long as we are still here, we should try new strategies and make a concerted effort to change our thinking to match what is happening in our industry.
For mortgage brokers who are viewed as scapegoats, wouldn’t it have been great if everyone had been a member of the National Association of Mortgage Brokers (NAMB)? Wouldn’t it have been great if we were all members of a strong trade association that could have had more resources to protect the brokers and originators who are now fighting the fight of their lives? Would it have been a wise thing to support an association like NAMB that had hundreds of members fighting for the benefit of non-members? Oh, and the cost … simply one processing fee every year! We are under attack because originators making hundreds of thousands of dollars per year, wouldn’t part with just $350. Who do we have to blame, really?
Deb Killian, CRMS of Charter Oak Lending Group LLC is a member of the National Association of Mortgage Brokers board of directors. She may be reached by phone at (203) 778-9999, ext. 103 or e-mail email@example.com.
1-National Association of Realtors, Aug. 31, 2010, Monthly Membership Report.
2-Web site: www.fraudblogger.com/PressRelease082310.asp.