National Loan Originator Licensing coming….For ALL LOs
Tucked inside the Foreclosure Rescue Bill signed by the President yesterday is a provision calling for all loan originators to be licensed. Bankers, brokers, consumer loan lenders, and credit unions; it doesn’t matter where you work. If you’re an LO you must pass a competency test that will be developed by the National Conference of State Bank Supervisors and pass with a 75% or higher, and ALSO, ALL NEW licensees will be required to take a mandatory 20 prelicensing course. For many of you reading my emails, you know my opinion on this: This is GOOD for our industry. Some companies train their LOs well. Others, not so well. In order to start rebuilding consumer trust, the mortgage lending industry as a whole must start with the relationship between the LO and the consumer. Some companies will have to be dragged kicking and screaming into higher standards, some clearly are already there. Obviously, I’m biased for more education because I’m an educator and this will bring more income to my firm. Yet we should all prepare for tougher exams, more required pre AND continuing education for many years to come. If you took the ethics class from my company, you heard us predict this all throughout 2007. My prediction today: Even tougher standards are on the horizon. You will owe higher duties to the consumer and will also have more liability. This is a natural narrative path for any emerging profession. Congratulations, LOs, you’re on your way to becoming professionals. Who remembers the last step towards achieving professional status? Whoever the first person is to email me with the correct answer, I’ll let you attend a continuing ed class at no charge. Answer posted in next month’s newsletter and on the NAMF blog as soon as it happens.
Update: Mike England from The Money Store was the first person to email me the correct answer:
A highly specific code of ethics along with industry self-regulation of ethical conduct. (Remember, a simple, vague code with NO enforcement is meaningless.)
There must have been some particulary serious violations that prompted this law. Wouldn't it have been easier just to make ...
When the issue of fudicial responsibility began coming to the forefront I felt a sense of relief. I guess I ...
Comment by Kevin Haynes on 8 September 2008:
I feel licensing is long overdue for LO’s. This will lead to more professionalism in the industry and weed out those who are not qualified and those that don’t have the ethical standards necessary to provise to their customers.
Comment by Stephanie Grosely on 10 September 2008:
I definitely agree with national LO licensing. I’m also happy to see that bankers, credit unions etc. are also among those to be licensed. That way, those who couldn’t make it in the broker world can no longer hide behind a bank title.
Comment by Susan Lohse on 19 September 2008:
National Licensing is a good thing. It will definitely put some professionalism back into the industry and hold Loan Officers a little more accountable for their transactions. With the National Licensing, the Loan Officer’s throughout the country will be a more uniform, eventhough individual states will still maintain some of their own lending laws.
Comment by Michael Belisle on 3 November 2008:
National Licensing is fine as long the fees and costs of these courses do not get to high.
Comment by Jeff Rafuse on 4 November 2008:
I think the licensing is a very good thing, and also agree with Stephanie that it is nice to see that all originators of mortgages are under this group, rather than just loan brokers. Anyone that is offering mortgages to the public should be have to meet the same requirements. Also, as Michael mentioned, the fees and costs are certainly a concern of mine as well. I have already felt a bit of a “money grab” going on at the state level with our WA state licensing requirements, and having to pay fees a second time to get registered on the online database, even though I already paid to have that done under the old system. That is my predominant concern, because I believe that the regulators know that since we have to pay the fees to be legal, they can essentially charge whatever they like.
Comment by John Mayfield on 5 November 2008:
It is about time that banker-brokers fall into this category too. When this came down for LO’s, I knew a few LO’s that went to work for banks to avoid the fees and the licensing. I agree with Stephanie, they can no longer hide behind a bank.
I have worked very hard to be compliant and maintain trust and integrity with my clients. I want all LO’s to do the same. This is our profession and we have to protect it.
Comment by Denise Swafford on 10 November 2008:
I agree. Licensing is necessary. Even though it doesn’t establish who is above board. If the fees become prohibitive you will see loan officers move to lending institutions who will most likely offset the costs of continuing education.
Comment by Sandi Paradiso on 11 November 2008:
I agree. I think the licensing is very good, I think all LO’s should be treated the same, we should all have the same requirments. I too would be concern about the fees, They need to keep the cost down. I just got my license in Aug, now I have to renew and take 2 continue classes befor Dec, I feel the crunch. We do need to protect our profession. Maybe the consumer will feel a little bit more secure, knowing that LO’s have to go through alot of training.
Comment by Sarah Batson on 11 November 2008:
When I became a loan officer in the middle of 2007, I was very suprised to find that classes, testing, and licensing had not already been required. We are dealing with people’s life savings, the next 30 years of their lives, their investments, not to mention the legal liabilities. I agree with the licensing requirements and am also so glad that this will include bankers, etc…
I agree with the concern regarding the fees of courses and licensing. I do not believe I can write the fees off as I am a W-2 employee in order to do FHA loans.
Comment by Catherine Rawlins on 17 November 2008:
Loan officers who work for banks, credit unions and savings & loans do not have to be “licensed” but only “registered” under the current law. That means they do not have to take courses or pass an exam.
The bank lobbyists have a much bigger budget than does the National Association of Mortgage Brokers.
Comment by Catherine Rawlins on 17 November 2008:
I double checked with DFI on the licensing issue and that was their “take” on the national licensing law.