| SECRETS EXPOSED!
| Insights, Opinions & Commentary
| | The Solution As I See It | As I'm sure you do as well - I see so many regulation enforcement issues, arrests, fraud blogs, convictions, license revocations, law suits, and jail sentences in various publication lately, I am astonished at the lawless natural of our industry now days. Astonished is really an understatement, I'm even more shocked then that!
However, I want to offer up a solution, which I know in the long run will solve this epidemic of greed that seems to be growing. Just like in college, where people have a Major and a Minor when they graduate and are degreed - we need a national mandatory licensing program at the industry entry level position of Loan Officer - a serious one. One part of getting licensed is they need to be educated and certified by an a authorization certification board and have a Major in Underwriting and a Minor in Processing. Any sales background should a No-No PERIOD.
Those two 'training required' skill sets are truly what separates one good LO from another. The LO position needs to be no longer be thought of as a sales position. It's that DNA, when coupled with 'commissions' which has evolved us into the mess we see in our industry today.
Reducing commissions to small incentive bonuses (when certain goals are met), on top of W-2 salaries for LO's and staying away from the sales-type DNA, but instead hire for good customer service skills, and train to that end while introducing the underwriting and processing theory to the new LO, is exactly what I mean. Sound revolutionary? Nope, what I describe is how the subprime industry worked when I got hired in my early 20's, and how it was for the first 90 years of its existence. It's a tried and true operational standard. Big commissions breed fraud.
To start this evolution into your industry sector, I call upon shop owners all across the Country, to begin today hiring and training in this new direction; I'm certain you'll see the benefits very shortly in your own company. I've done it, seen it done by others, trained it myself, and watched it work for me personally and others for many decades.
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| | | Stranger to 1003 ... 1003 to Funded - Part Duex | To continue this series on real compliance issues faced by both Loan Officers and their Owners; there's still plenty of things to consider besides what's become commonplace of late, with the LO generally being clueless about the range of laws that regulates what it is they do – many of them merely: 1). attract an applicant, 2). post a Loan Scenario someplace on the Internet to interest a wholesale AE, 3). get a preapproval from that AE, then toss the 1003 to someone else in the company to turn it into a big fat commission check – and the LO moves on to the next one. The compliance issues which they face are monumental, and all should be met – yet sadly too many are clueless. Their attitudes all to frequently are "I'm here to make a living, I gotta keep selling and selling, I don't have time for all this regulation noise."
At this point, these "ignorance is bless 1-2-3" LO's who operate this way will tell all of us, moving from ‘Stranger to 1003' is a breeze, on the other hand however, it surely qualifies them worthy of huge payroll sums (in their minds). Without doubt they typify the old adage ‘ignorance is bless' method, yet recklessly leave themselves and their bosses open to a great deal of liability.
From our last piece on this topic, we can only hope these LO's did no advertising, therefore we can rest assured they did not utilize any 'triggering terms' and thus ending up violating Truth In Lending and possibly RESPA advertising issues (we cross our fingers). We further trust, their applicants did not come their way from ‘referrals' or we may have to bring to their attention the RESPA Section 8 unlawful kickback violation boundaries they may cross, which we discussed last time ... since the ‘ignorance is bless 1-2-3' method easily can stumble themselves right into that fertile ground with little or no trouble. Regulation X of the Real Estate Settlement Procedures Act, as detailed in Section Nos. 3500.14-15 and 19, provides for fines of as much as $10,000 and one year imprisonment for failure to comply with the prohibition against unearned fees and kickbacks (the notorious Section 8 we all know and love). Hopefully they did all their work with the customer, at their company office, and no consumer information was jeopardized by their working with it in a home-office, and their subsequent likely GLB Act privacy violation negligence either.
When the "ignorance is bliss 1-2-3 crowd says "I didn't know" … violations of Regulation B of the Equal Credit Opportunity Act, as detailed in Section No. 202.14, requires the U.S. Department of Treasury's Office of Thrift Supervision to report discrimination practices to the U.S. Department of Justice for prosecution. As an owner, are you real sure your LO's follow this one to the letter? Violations can result in civil liabilities for actual and punitive damages, class-action judgments, fines from $10,000 to $500,000, costs and attorney fees. We've still got Regulation E of the Electronic Fund Transfer Act, as detailed in Section No. 915, imposes criminal liability and penalties including fines of $5,000 and one year imprisonment for willful violations; for fraud, the penalties can be as much as $10,000 and 10 years in prison, when the LO was only concerned about selling and "didn't know." There is now new and growing concern over the new Fair and Accurate Credit Transactions Act of 2003 (FACT Act) with LO's and/or their employer and how they destroy their customer's consumer information before they discarded it! And of course, we trust the employer is properly paying the LO via W-2 (paying all appropriate payroll taxes and a minimum wage as well), and doesn't continue to violate both State and Federal Wage & Hour Laws by paying them via 1099; another mine-field facing both.
When we have LO's closing a dozen or more loans monthly, therefore earning well into mid-6 figures annually … as with any other occupation at this income level, they should be very well versed in their careers and the laws that govern what they do. Yet we see, day after day, time after time, this ‘ignorance is bless 1-2-3' crowd operating in a lawlessness way.
We are probably the most highly regulated industries in America. The maze of laws, regulations, etc. are mainly aimed directly at the industry entry level position of Loan Officer, that's where the 'action' is and where MOST lawlessness occurs. Why? Greed and stupid bosses who don't train. In our next edition, we'll discuss the relative ease of Stranger to 1003 vs. 1003 to Funded.
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HIGHLIGHT: What you get from our Mentor Program
Precisely and exactly this. Our faculty will show you where not to step in your business; think that has value to you? Or you can continue to learn through trial & error - which do you think will feel better?
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