As published in Scotsman Guide's Residential Edition, January 2011.
In the fall of 2007, a highly respected mortgage-industry economist said that industry participants should concern themselves less with the market's natural corrections and more with the government's reaction to market changes. At the time, that statement seemed profound. Not anymore.
In the past three years, legislative and regulatory changes have seemed as abundant as alternative-loan products did in the boom times. Of these changes, perhaps the most important came from the Secure and Fair Enforcement for Mortgage Licensing Act (aka the S.A.F.E. Act). Although many industry professionals had issues with the law, I remain convinced that mortgage brokers are better off because of it.
Yes, Nationwide Mortgage Licensing System (NMLS) exams require a heavy time commitment from brokers and their loan originators, all of whom must complete prelicensure education and testing.
And yes, the law unfairly targets mortgage brokers while exempting loan originators who work for federally regulated depository institutions from key requirements.
I didn't say the law was perfect. But get this: Because of the S.A.F.E. Act, most of today's mortgage brokers are more prepared and qualified than they were a few years ago. Moreover, I believe that professionals industrywide are making a commitment to education and to serving consumers with greater integrity and fiduciary responsibility. After all, those who don't will likely face serious legal repercussions.
In addition, the pressure of peers and co-workers who know about impending test dates can present psychological challenges. The fear of coming back to the office with a nonpassing grade should alone incentivize brokers and loan originators to prepare properly for the NMLS exam's national and state components.
But there's another point to be made here. Although few mortgage brokers and loan originators like the idea of being tested, those who work in more than one state -- me included -- face the additional challenge of needing to pass a different exam in every state in which we work. The disparity of rules, regulations, fines and license-maintenance requirements disrupts the current system and unduly burdens mortgage brokers and loan originators.
Although I'm a fan of the national system, it would be more practical if every state's licensing requirements were uniform. Until we reach that point, true transparency in industry licensing will remain only a myth.
As the economist said in 2007, our biggest problem isn't market contraction but rather legislative and regulatory expansion.
is managing partner of Assurance Financial in Baton Rouge, La. He started a term as president of the Louisiana Mortgage Lenders Association this month. Assurance Financial, licensed throughout the Southeast, is looking to expand its mortgage-lending operations by entering markets where there are no current branch offices. For information, call (888) 249-3629 or visit www.afgloans.com.
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