Monday, January 3, 2011

National Mortgage Licensing System Goes Live Today

The National Association of Mortgage Professionals (aka NAMB) fought in favor of a national licensing system for many years.  

 The NAMB had twin goals of allowing better access to multi-state markets for loan originators while simultaneously looking to end the practice of company licensing for non-depository mortgage originators (ie. a "Mortgage Lender" could employ as many unlicensed originators as they wished, while Mortgage Brokers could only use licensees to originate).    A tertiary goal was to stop abusers from state hopping since there was no sharing of data on abusive loan professionals, and in many cases (Florida inclusive) the state licensing systems only checked for state legal action and not Federal crimes (see Florida once again).

 During the boom, unlicensed individuals committed some of the worst abuses.   Countrywide Home loans, for example, was one of the top abusers of the system.  The only sad omission from the new system is employees of nationally chartered banks.  This means that another Countrywide could spring up, and send out legions of unlicensed people, to sell loans on a wholesale basis to non-depository lenders and brokers that are as a class, predatory.  In addition, it was these types of bank reps who encouraged brokers to find loopholes in underwriting guidelines, present and obtain unwarranted lending exceptions or worse.

  Ultimately, I agree with the perspective that it is counter-productive to asses the credit risks of a group of professionals disproportionately stung by the credit bust.   Mortgage brokers are the only real estate lenders who must disclose all of their fees and loan pricing on the Good Faith Estimates today.  The mortgage broker is the only check on bank and non-bank lenders' loan pricing and profit margins.  In addition, a mortgage broker is one of the few outlets remaining for borrowers who need access to private capital (the "hard equity loan") when they do not qualify for a traditional bank loan.   

 As the agents of the banks, mortgage brokers have gotten hit pretty hard in the PR war, being that we're the front lines, the people that the public is acquainted with.  The additional costs of new national licensing are a serious burden on Loan Originators and Brokers like myself, but needed to restore credibility to our profession.  But make no mistakes, if every mortgage broker in the country is sidelined for personal credit issues, it will simply complete the process of tilting the tables completely in favor of the too big to fail banks who caused this mess in the first place.