Firestorm Issue? Arizona Senators, Please Vote YES on SB-1028, Loan Originator Licensing

We did it last year in Washington State. It put 12,000 Loan Originators out of work. The media bad mouthed the mortgage brokers and loan originators to the point where everyone is scared to go to a Mortgage company because they think they are getting screwed. Loan Orginators can no longer charge discount points unless the customer is buying down the rate and then that goes to the customer. LOs can not charge an origination fee, only a Mortgage Broker fee. So that client sees that and you have to now explain to the client and justify your income. They always say "you think your worth that much?" LOs have to disclose the amount af Yeild Spread Premium, and explain that the customers rate is higher because of it. That means an LO can not call it a no fee loan...so the consumer goes to the bank and they give them a no fee loan and do not have to disclose it or even tell them they are being charged on the back. Your wanting to clean up the industry, and that is the right direction. But they can not regulate the banks and so the banking Los do not have to be tested or fingerprinted or background check. Most banks only do a credit check before the hire employees.

I suggest you go shoot your self in the foot first and then rethink your position. I have a 45 you can borrow?

Oh, and thanks for the link. I will be sure to contact your Senetors to tell them to put thousands of more people out of work. It would be a good thing if it was fair...So I will tell them also to have the banks do the same....but since they get alot of campaign funds and these bills are paid for and supported by banks so as to eliminate competition. It is a good thing when competition is eliminated. Then one has the power to charge whatever they want becasue you can't go anywhere else. In less than 6 months, my company has lost over 550 Loan Originators because of this. And I have seen 14 companies in my city close the doors. I knew most of these people and they passed the fingerprinting and testing. Most of my customers now are from people refinancing because some bank put them in an Option ARM when they are both on a fixed income so they could qualify. I talk with Realtors everyday that are only making it on short sales and soon to be pre foreclosures. And none of them have said that these people went to a Mortgage Company for their loan.

Chuck,

My initial conversation with a client has to do with the value a mortgage broker brings to the table.  The next part of the conversation is my explanation of Yield Spread Premium, and that fact that a range of rates is available every day (as opposed to your bank, who offers the manager's rate of the day.) 

I tell them that whether it's called an origination fee or a broker fee, it's how I get paid.  By law, every broker and broker's LO has to disclose the YSP, so that's not a problem for me.  Then we discuss "Zero Fee Loans" and how that's never true, whether the lender is a bank or a broker. 

I tell them that banks don't have to disclose what (if any) YSP is going to the LO at the bank.  I paint the broker as the "sunshine law" originator, and the bank as the "Chicago smoke-filled backroom" lender, where the borrower can't find out exactly who gets paid what.

The last thing I tell them is that I will never promise the lowest cost loan, because there will always be someone out there who will undercut my price if given the chance.  That's the truth, isn't it?

By the time we finish the conversation, they've been educated on the scam artists out there.  I come to them with open hands, and by that point in the conversation, they know they can trust me.  My fallout rate is less than 3% over the past five years.

Mike in tucson

Mike,

You underlined oversight at the State level...very important!!! Thanks,   Fran

If other industry professionals in Arizona have to be licensed, then it only seem fair that we should deal with those that have to have a license to perform their duties in a fair and professional manor too.....this also includes bank personnel who inadvertantly often have little or no training it seems when I talk with them. Continual Education should also be a part of the education process as it is for Realtors.

By the way ..the banks should also perform banking duties, and leave Real Estate to professional Realtors.

Mike - I agree that you should have to prove that you are qualified to deal with the public. Bank employees should have the same rules.  Just my opinion, I don't get to vote in Arizona

I too have explained and done every part of what your saying. And the fall out rate use to be good. And still is. But what I was saying is that people aren't even comparing banks and Mortgage Companies any more. A few months back a reporter on The Today show came on and bad mouthed brokerages by saying things like..."what the heck is an Origination fee...you should refuse to pay that...I don't even know what that is. She obviously didn't even do a decent job of investigating...but then my wife turned to me and said...Ya, why would anyone pay that stupid fee? The light went off in my head...that is what people are thinking. I explained to her, that is how I pay our Mortgage and your truck payment. I had a customer tell me i was lieing to them when I explained the YSP to them. He showed me the GFE from the bank and said, "see, their is no YSP as you say". I explained to him that is why he is charging you 6.5% instead of the 5.875% (that was with a (.258) rebate) that you really qualify for and that I could lock in that rate today and it would be guarenteed.

The Mortgage company I am with is working on a merger with a bank just so we can compete and do no-fee loans and not have to disclose the YSP. What ia am trying to tell you is that the government is not doing you a favor by doing this. They need to make it fair and do it with the banks also. I had a client tell me that there bank manager told them they did not need to charge them any fees because he is an hourly wage employee. He lied! Good luck sueing him....you can't! You can try to sue the bank...but if your getting a loan from them you probable don't have enough money for the lawyer fees.

Licensing is good and should have been done years ago. But starting it now and not including the banking industry is not fair. The media has even blamed Mortgage brokers. WAMU staarted the problem with having their appraisers make the value whatever they needed. That is why they are under investigation. Countrywide is going thru an FBI investigation for securities fraud. a few other banks that have their own appraisers are going thru investigations. Ameriquest was banned from doing loans in Washington State becasue of them paying their own appraisers...and if the apprasal wasn't what they wanted, they were looking for a new job.

You can explain everything and even wear a pope hat. But people believe what the media tells them more than they believe the pope! Unless they already know me or a friend told them they can trust me. I have a securities and insurance license. That was done at the Federal level, the state only does a state level check.

We all thought it was a good thing here to...boy were we wrong.

Mike, It looks like you started a firestorm.  So, I will jump in and say that I believe that EVERYONE involved in the sale of real estate should be licensed.  What's good for the goose is good for the gander if you know what I mean.

Mike - good post! I am amazed that this specific group does not need a license!

I'm with you all the way on this one Mike.

I firmly believe that everyone involved in a real estate transaction should be licensed at the state level.  If the fact that mere licensing will cause many to choose between fulfilling the basic requirements to get such a piece of paper or not having a job...so be it.

Those crying "foul" will have no sympathy from this corner.

Kent,

I'm with you on this one.  When I was a developer, I had to be licensed in the State of NJ as a builder.  Pretty much the only thing I've not had to be licensed for was selling Fuller Brush door to door as a teenager.  LOL

Chuck,

Amen, brother!

Barbara Jo,

But I'll bet the people who do your nails have to be licensed.  It's amazing to me that the situation in AZ has gone on for as long as it has.

Don,

Double Amen!

Chuck,

You have the makings of a blog post here.  If you'll post to the opposite point of view, we'll have a conversation that might bring in some of your brethern in Washington State who have been hurt by the legislation.  It's a conversation worth having, and I appreciate your thoughtful and heartfelt comments.

Larry,

The banks are lobbying hard to keep from having to play by the same rules.  I call that the "smoke filled backroom" approach.

Anne,

You rock, girl! 

Fran,

Yes I did!  It's important to elevate the image of the profession.

Mike in Tucson

Hi Mike, (and Chuck),

I am a Realtor and former Loan Officer in Washington State.  I did the licensing background check and the fingerprinting for the LO and got my license.  However this year I quit doing both and just went back to my real estate business.  (Didn't enjoy being a Loan Officer). No one does background checks on our Realtors yet (new legislation starts it in 2010 here).  We have been licensed and had to check on the form that we aren't convicted felons, but no one checked.   Since I am a Retired Washington State Patrol Sergeant, it was kind of redundant. 

Chuck is right 12,000 people went out of the LO business.  I believe that was mostly a good result.  According to the State Dept of Financial Institution over 25% were convicted felons.   Lots of those 12,000 were awful.

Chuck is also right that it is TOTALLY UNFAIR for Mortgage Brokers to have all the background checks, fingerprints, ethics training and continuing education requires......  While Bankers have to do nothing.  Bank lobby was stronger when it came time to pass legislation. 

I also explain YSP to my clients.  Did it as a Realtor before I had my LO license, and am doing it now that I gave up my LO license.  Then I refer to my two favorite LO's (not a bank branch ever) and explain the value of their service. 

The licensing legislation was good here, beneficial to the consumer, BUT was unfair to the "little guy" and didn't make the "big guy" play by the same rules.   Some of the little guys have gone away or went to work for the big guys.  Interesting now how some of the big guys are in big trouble and are going away too.

List and Sell (Ethically and Honestly with Full Disclosure)   Gary @ RentonHomeFinder

Gary,

Thanks for a thoughtful comment!  I'd appreciate hearing from other Loan Officers in Washington--bring your friends back.  That offer is extended to you, Chuck, as well.  I sure appreciate the various points of view.

Mike in Tucson

Quite a good discussion you have going here, Mike.  Obviously a hot topic.  We real estate agents are so caught up in how unappreciated we are that we may sometimes forget mortgage loan originators face the same issue.  It's a constant consumer-education issue, I guess.

Margaret,

You're appreciated here!  LOL  Thanks for commenting.

Mike in Tucson

Mike - an issue near and dear to my heart.  I can tell you that also getting involved with your state association of mortgage brokers/professional will be important!!  Thanks for highlighting this!

Mike in Tuscan After going back and reading the post (mine included) I did realize that this hit a sore spot with me and I appoligize that I got so emotionally involved. Wow!

How is tuscan this fine summer...I have a brother in Chandler and he keeps telling me to come visit in the summer when he is not working, because that is the only time he can take a vacation. He works for the Cardinals...I usually reply...see you when you retire...hehehe...We'll be down again for Christmas...

Gary What is really funny is that I know a guy who couldn't get licensed because of being convicted for child pornography, but is now an LO with a major bank.

The bigger question here is, Why are alot of licensed Realtors that agree with the licensing, are still steering people to their in house bank or their freindly neighborhood bank. Seams hypacritical to me. Or is it because the client doesn't really matter...to them?

Gary Here is the bottom line. I went to a new meeting today. We spent $125 for a background check, $20 for 2 fingerprint cards. Hundreds of dollars on lawyers for new disclosures. And legislation is going to change so that we will all need to be associated as a bank. As a broker, you won't be able to originate conforming, FHA and VA loans. Soon, on any Fannie and freddie loans, you will not be able to order the appraisal. The appraisal will have to be ordered by the lender. Back to not having to disclose the YSP. Association of Mortgage Brokers has figured that Mortgage Brokerages will be extinct in 2 years, and all will have to be W2s accociated with a bank. Brokerages will not be able to get insurance enough to protect them from law suits, due to new legislation Jan 1st, 2009. And Federal Legislation is to follow. 

Mike - 

Chuck is right.  It won't be long before everyone in Washington State has to be employed by a bank.  AMB in correct.  The Mortgage Broker that I was licensed (small private guy ... years of experience) has decided to join a bank.  He had to make that decision just to stay in business.

I dropped my LO license, because I could see it coming and didn't want to work with the bank.  Second banks won't allow a person to be a Realtor and LO at the same time.  This has worked fine in WA (but not done much in the rest of the country from what I can tell).    Main reason is because I didn't enjoy being a LO, and really enjoy being a Realtor.  since I have two great lenders that I refer my clients to, I know my customers will be taken care of.

LO licensing got rid of a bunch of folks who should never be allowed to touch someone else's money, THAT WAS GOOD.   But the rest of the REGULATION will eliminate the Private Loan originator and EVERYONE will have to work at a bank.    This is not good for the great independent Mortgage Brokers like you. 

List and Sell  (from a former LO, now a Realtor only)     Gary @ RentonHomeFinder

CHUCK -I hear it a lot - That Loan Officers are "Over Paid". We do not just plug 2 numbers in a computer and hit the magic go button and have a loan generate. I think some people do not realize that we work just as hard as any other professionals in the whole transaction.The LOAN ORIGINATION Fee is not stupid as long as it is fairly charged and a LO isnt abusing it. Why shouldn't we get paid for our hard work? I am with my customers from begining to end (literally I go to closings just to answer any questions they might have) No other Professional in the whole transaction works for free so why should loan officers be any different? So often pointing the fingers at everyone else is so much easier than every one admiting that they played a role in the situation. Prime Example: I recieved an email from someone I have never worked with nor have we ever met. But he felt the need to tell me that the U.S. Economy is all gone to heck because of Loan Officers....not like me but just in general. (Wow was all I could say)

The Bottom line is that regulations wouldn't be bad if they are imposed on both Brokers and Bankers. But a License does not make a person a Professional. And in every line of work in all of our industry there is always going to be people that probably shouldn't be working in the housing or mortgage industry. I also think that some people can pass a test but that doesnt mean they are experts.

Quality means doing it right when no one is looking.  ~Henry Ford

So, how many LO's does it take to vote themselves out of a job?

Just saw that the SB 1028 Provisions regarding licensing states the following:

Requires mortgage broker or mortgage banker licensees who employ loan originators to comply with loan originator issuance of license, renewal, inactive status, fees and application laws.

So it does apply to Banks.

You can read when they vote and find the representatives email addresses and office numbers at: http://http://www.azsenate.gov/senators.asp

In Washington, licensing started this year...just for wholesale (states don't have oversight over FDIC regulated outlets)...it helped get some flakes out, but the bar was SOOOOO low, not enough people were forced out.  I took our 100 question test in a little over 30 minutes and passed.  It would be great to see a state actually develop a test that was challenging.  Hopefully AZ will raise the bar.

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