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During
the next year or so that we all get to enjoy
this restful industry-wide slow-down, I think it
would be a great idea to work on re-building our
industry from the inside; actually it's long
overdue! Lawmakers in many States and on the
Federal side, daily are creating new duties,
requirements and regulations to help protect the
public from the residential real estate mortgage
lending industry – our ‘self-policing'
unfortunately didn't exist much the past several
years, so now they're gonna 'teach us a lesson'
and make originators directly personally
responsible for more! In addition to now being
'banned' in several States, there's even a
Federal Ban on No Doc, Stated, etc. being
considered today! In fact, these past several
weeks, more than a dozen State lawmakers have
been 'tightening the screws' on originators in
many areas.
Broad and substantive mortgage lending
requirement and laws being passed I see, are
creating a 'duty of good faith and fair
dealing.' One of them says mortgage originators
(mortgage brokers & loan officers) 'shall
act in the borrower's best interest and in the
utmost good faith toward borrowers, and shall
not compromise a borrower's right or interest in
favor of another's right or interest, including
a right or interest of the mortgage originator.'
A mortgage originator shall not accept, give, or
charge any undisclosed compensation or realize
any undisclosed remuneration, either through
direct or indirect means, that inures to the
benefit of the mortgage broker on an expenditure
made for the borrower – a full blown fiduciary
duty like most other trusted professionals
have.
This approach subjecting originators to harsh
discipline & aggressive punishment, I have
been in agreement with for many years myself –
but I frequently see it falls far short in many
cases.
Here's what I mean. The individual loan officers
(where it seems much of this legislation is
aimed), we all need to recognize are not
mortgage experts, they are in fact the entry
level position in our business. Far too many of
them are not ‘career minded' but instead see
themselves as 'commissioned salesmen' - a secret
they keep from the public. If they were more
'career thinkers', they would take the time to
improve their understanding of our business,
instead of a narrow focus mostly on their
commission earnings. The more career minded ones
among their ranks, spend the time needed to read
& learn from several regular industry trade
publications. During that time invested, they
frequently see articles, as I do, about the
thousands of disciplinary actions taken against
wrong-doers in the business.
Unfortunately they are considered as
'independent contractors' by a great many
employers; they advertise and communicate with
potential borrowers with virtually no training -
when in fact they really have no business being
out there independently, in the unsupervised
wilderness.
So let's all try and work on their ethical
attitudes and educate them on what's right and
what's not OK. Let's start with these three (3)
very basic issues which every single one of them
should already know, I mean they should
know all this right now; from my experience many
of them don't however.
First off, let's quickly discuss the
ground-breaking Federal Truth in Lending Act,
which (among other things) created
"APR." Be sure all the LO's YOU know,
understand that they are required to provide
potential borrowers with an accurate APR
whenever they reply to a comment containing an
Interest Rate. ie: They take a casual inbound
phone call, and are asked "what's your
rate?" – be sure they also quote the APR
which goes with the loan ‘rate' they speak
into the telephone receiver, or on paper if they
write it down – in an e-mail or even on
cocktail napkin! They should have been taught
that on day #1 when they first started.
Second, and speaking of e-mail – there's the
Gramm-Leach-Bliley Financial Modernization Act
of 1999. The GLB Statute addresses customer
privacy issues on a national basis. Among many
different requirement of this wide sweeping law,
e-mail communication with potential borrowers
that contain personal information (even JUST
their name), must be password protected!
Translated: LO's cannot legally e-mail back and
forth with a potential borrower using any old
e-mail client they choose, it must be password
protected (with at least 8 characters). They
should have been taught that on day #1 when they
first started.
Third, RESPA and it's frequently discussed
‘kick-back' section, LO's need to be 100%
familiar with. They cannot give ‘anything of
value' for a referral as a Thank You to the
referring party when a referral customer closes
… over $25, under $25 or otherwise … nothing.
They should have been taught that on day #1
when they first started.
We are the most widely regulated industry in the
Country – these are just part of three of them
… there's dozens and dozens more. Again, we
need to breed/guide a whole new crop of ethical
and law abiding LO's, for when the cycle
reverses again in a couple of years. And not by
telling them they're going to go to jail, but by
having the right and proper ethics and integrity
-- is the way to go. Click
Here and tell us what you think on our
Discussion Board
B&C Borrowers Paying Off Credit
Cards First?
Subprime borrowers are more likely to be 30 days
or more late on their mortgage payments than on
their unsecured credit card obligations, a
"significant departure" from
historical consumer behavior, according to an
Experian study on the subprime lending market.
Historically, consumers have paid mortgage debt
over bankcard debt, so the finding
"represents a significant departure from
conventional behavior," the Costa Mesa,
Calif.-based Experian said. Subprime borrowers
were defined as those with an Experian credit
score of 620 or lower. Borrowers with prime
credit scores of over 680 continued to follow
the traditional pattern of paying mortgage debt
before credit card debt, the information
services company reported. "The current
marketplace debate and increased visibility on
subprime lending led us to examine historical
consumer payment trends to see if they have
shifted," said Kerry Williams, president of
Experian Information Solutions.
"Interestingly, our data revealed that many
consumers in the subprime segment have adjusted
their payment patterns in order to better manage
their personal finances." TRANSLATED: Means
to me, they like them, want to keep them, and
would like YOU to consolidate them so they can
have them freed up for future emergencies! CLICK
HERE to give us your opinion on our Discussion
Board
Freddie B&C Program to Support
Prepay Penalties
A new Freddie Mac subprime purchase program in
development for release this summer is expected
to support prepayment penalties, but in a more
consumer-friendly manner than in the past,
according to a presentation at the National
Association of Mortgage Brokers annual
convention in Seattle. The program, which
Freddie has been testing with five or six
lenders, will be in line with the
government-sponsored enterprise's new
restrictions on certain nontraditional mortgage
purchases set to take effect Sept. 1, said
Charles Coulter, vice president of sourcing
strategies and solutions at Freddie Mac. When
asked for further details, he said he could not
be much more specific about the program because
it is "still in development." However,
when asked about prepayment penalties, he said
the planned move down the credit curve is
expected to support them, but would never allow
them to go beyond the fixed period of the loans
carrying them. CLICK
HERE to give us your opinion on our Discussion
Board
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