I always answer this with it depends on what type of qualification or standards you expect from the Loan Officer or any service professional you are working with. In every occupation involved in the Real Estate industry there are educational, testing, training and licensing requirements. Realtors take many classes and exams in order to be licensed to sell Real Estate. Appraisers must take extensive classes and tests and work many hours as an apprentice before they can be fully licensed. Attorneys – years of schooling and bar exam testing before they practice law. Insurance agents must take classes and pass tests to sell Home and Auto Insurance. Financial Planners, while not necessarily related to a Mortgage or Real estate transaction directly are required to take many hours of classes, training and pass a test to get their license. This leads me to Mortgage Loan Officers and the astonishing creation of two sets of rules.
If you are a Mortgage Loan Officer and work for a non-bank or non-credit union (a/k/a Mortgage Company) institution you are required to take a minimum of a 20 hour class and pass an extensive Federal test and State exam for every state that you originate in. You are also required just like all the industries above to take yearly continuing education courses to maintain your license. This is fair and I am happy with these requirements. However, if you originate and advice people on mortgage options at a bank or credit union you could truly be flipping burgers on a Monday and originating people’s mortgages by Friday. This is in no way a cut on anyone flipping burgers as I know they go through more of an extensive training program than is required by these institutions or as required by law.
How can this be? Well in 2010 as part of a fix to repair financial regulation the Dodd Frank Bill was enacted. Senators Dodd and Frank consulted with many top bank officers and were convinced Banks did not need to have their Loan Officers take any of these tests and that the banks would take care of all the testing and training on their own. Now, if you are like me, you are now remembering that these are the same banks that required government bail outs and are probably the last industry that should be allowed to take care of anything by themselves. Even now in the news, the newly formed CFPB (Consumer Financial Protection Bureau) has handed out more fines to banking institutions than any Mortgage company or other Real estate related company.
Now, here is the truth why there are two sets of rules. When a Loan Officer wants to leave a bank or credit union to work at a Mortgage Company it does not matter if they have thirty years of experience or one. They must start all over, they must take a 20 hour course, take a Federal Exam, then a state exam and then wait on the State they are originating in to approve their application status. This takes no less than 60 days in most cases. However, if a Loan Officer would like to leave a Mortgage Company to go to a bank they have to do nothing but notify the NMLS (National Mortgage Licensing Service) of their new company. I can attest that when this law passed in 2010 I saw 3 people from a company I worked with alone fail the tests only to go originate at a bank weeks later where there were no testing or educational requirements. The motive behind this was to create an atmosphere where it was hard to leave the banking institutions and make it harder to work for their competition which almost always had better programs and better rates. Result, banks cut Loan Officers pay, costs to borrowers went up and banks started making more money and profits and saw much of their competition go away.
Now let’s talk about programs – this is 2014 and no longer 2008 when a person with a 600 score and no income could purchase a home with no money down. However, there are still many programs that both banks and mortgage companies offer to help consumers. Most banks and mortgage companies will offer Conventional loans, which are then sold off in the secondary market to Fannie Mae or Freddie Mac. However, most banks only work with Fannie or Freddie which can limit their guidelines. Many mortgage companies choose to work with both of these large investors.
Many banks/credit unions do not offer FHA or VA loans and if they do they may choose to broker it out to other lending partners so that they are not the direct underwriter – that can be an issue during the processing, communication and affect the time frame on closing your loan. Mortgage companies may also offer some of the outside of the box programs offered such as the FHA 203k product which allows you to purchase a home and add repairs/improvements to your loan amount. They may also have many different Refinance programs that are typically not offered by a bank/credit union or are only offered by a bank if your loan is currently already being serviced by them.
In conclusion, when I see a Doctor, Dentist, Attorney, Plumber, Financial Advisor, Car Mechanic, Realtor or Loan Officer I expect a degree of professionalism and require education that is on an equal playing field. No excuses and no loop holes.
Many still believe that the banks are where you go to get your money and are the safest place to keep your money. I think many Americans have realized over the last 5 years that is the farthest thing from the truth. If you are like me and demand professionalism and experience when selecting who you will choose to work with when buying products or services, the next time you need a mortgage to purchase or refinance home demand a licensed Mortgage Professional.
Mike Scalise NMLS#207383 Phone: 815.621.9888 Email: email@example.com