Are Loan Originators Professionals?

When I ask the question “Are loan originators professionals?” to a group of loan originator students in ethics classes, almost everyone says “yes.” Anyone can do their job in a professional manner (adjective,) but not everyone is a Professional (noun.) Is your barista at Starbucks or the person who bags your groceries a professional? If you answer “yes,” what makes a barista different than a doctor or lawyer? When we use the word Professional as a noun, there’s a classic definition that we refer to here:

A Professional:

Has specialized knowledge in his or her field. This body of knowledge is generally agreed-upon by those in the industry and is typically described within state and federal law. A professional knows way more than the average random consumer about his or her area of expertise;
Is required to complete a minimum amount of formal, academic education;
Is tested for competency;
Is licensed;
Must maintain that license with mandatory continuing education;
Subscribes to a mandatory code of ethics in an industry that is self-regulating. This is different from state or federal government regulatory oversight. The industry itself regulates ethical conduct over and above state and federal law;
The self-regulating body enforces their code of ethics with sanctions for violations;
Owes fiduciary duties to clients. This means the professional has the highest prescribed duty of loyalty to the client, to put the client’s interests above his or her own interests.
Here is how loan originators (LOs) measure up against the above list:

Specialized Knowledge
There is a power imbalance between mortgage loan originators and the consumer. LOs know way more about how the machine we call mortgage lending works than the average random consumer will ever know.

Education
The SAFE Mortgage Licensing Act of 2008 requires 20 hours of pre-licensing education for licensed loan originators. The Dodd Frank Act of 2010 requires equivalent education for depository bank registered LOs.

Competency Test
The SAFE Act requires licensed LOs pass a competency test.
The Dodd Frank Act requires registered LOs pass an equivalent competency test.

Continuing Education
Licensed LOs now complete 8 hours of continuing education and any state required CE
Registered LOs complete the equivalent of the above.

Code of Ethics
There is no mandatory code of ethics for mortgage lenders. What codes exist at the national trade level, are voluntary and offer insufficient guidance. Currently there is no ethical oversight in mortgage lending by the industry. There may be individual company codes of ethics for employees.

Fiduciary Duties
Some fiduciary duties exist between loan originators and their clients. For example, Washington State prescribes fiduciary duties for mortgage brokers and the loan originators who work under the supervision of a mortgage broker. Other states may have also added this duty. But no such duty exists in all 50 states at the federal level.

Loan originators are classified as an “emerging profession.” We are living through a historic, transformational phase. On the other side of the transformation, which could come sooner than some people think, I believe LOs, no matter where they work, will owe fiduciary duties to consumers, even with LOs who work at a bank. If you look at the narrative history of any profession you see, over time, a steady increase in the number of continuing education classes required, more mandatory pre-licensing education, an elevation of duties owed to clients, more expansive ethical codes, and tougher licensing exams. Loan originators, no matter where they work, will eventually transform into professionals.

Many in the industry believe fiduciary duties means higher liability to the company. However, if done right, this may actually have the reverse effect by lowering the mortgage company’s liability.

Looking after the best interests of customers is almost always in the best interest of the company.

Once the mortgage industry decides to adopt a prescriptive and descriptive code of ethics AND ALSO a framework for industry self-regulation, an added benefit will be that government regulators and politicians will stop passing more laws directed at our industry.

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Questions.
1) Does your company have a code of ethics?  If so, post the link in the comment box and tell us if you think your company’s code has helped guide your (or your colleagues) as you’ve faced ethical dilemmas in your career.
2) Do you belong to a professional association?  (Example: NAMB, MBAA, NAPMW, NAMF, Mortgage Planners, and so forth)  If so, find their code of ethics and read it. Could their code of ethics be improved? If so, how?
3) The mortgage industry has lost thousands of loan originators over the past few years.  Some will eventually return.  When they do, what

32 thoughts on “Are Loan Originators Professionals?

  1. My company does have a code of ethics but I can’t seem to find it anywhere on the web site. I have a hard copy on paper but it will take me all night to retype it.
    I have noticed that LO’s have come a long way towards professionals just since last year, and it is exciting to see the changes happening. Mind you I have only been in the business for 5 years, but even in that short time a lot has changed.

  2. My company does not have a code of ethics. However, I believe the implementation of making the mortgage originator a fiduciary is a great thing. My hope is that it will elevate the mortgage industry above that of the used car salesman. We are very specialized in what we do and what we know. We should have the same code of ethics toward the consumer as any other professional.

  3. My company does not have a code of ethics, but I do. and that is what guides me, and dont we just need one code of ethics for the whole Industry, ethics is ethics, honesty is honesty there should be little difference between companies no matter what their business styles and operations are.
    There is to my mind a greater movement towards professionalism today than say three or four years ago when just about anybody could call themselves a loan officer. I applaud the exams the new rules and regulatios and all the rest of the obvious attempts to define the profession and protect the consumer, but most of all is the awareness that there is much to be done and efforts are being made to upgrade the work to professional status

  4. My company does not have a written code of ethics but I think it’s about time to have one. Ours has been more of an understood code of ethics which we talk about in meetings and in the office, as well as show in our day to day action. I do believe that being a professional requires one to act in such a manner, not just say I am a “mortgage” professional.
    I believe that it is inevitable that some of the lost people in the mortgage profession will return. They will have to qualify and maintain their license just as the rest of us do. It will definitely keep some from doing so since they will find that it is not as easy as it used to be to call yourself a mortgage professional.

  5. My company does not have a written code of ethics, we belong to the National Reverse Mortgage Lenders Association (NRLMA) and subscribe to its Code of Ethics and Professional Responsibility. This document seems fairly complete and is divided into a Values section which conveys ethical and professional principles expected of members and a Rules section which addresses the guidelines and standards of ethical and professional behavior expected of members. There is also a provision to address and take appropriate action with respect to alleged violations of the code of ethics. It could possibly serve as a starting point for developing a “Code of Conduct” for the mortgage industry.

  6. The company I work for has an employee handbook, which contains a Personal Conduct Policy. As far as Ethics go, our hand book reads to the fact that all employees must adhere to the Ethical standards set forth by DFI and all the Regulatory Agencies that govern Loan Origination. I have my moral values in addition to our Personal Conduct Policy and follow any required Ethical Standard in our industry. I live by my morals on a daily basis; by following our Personal Conduct Policy and industry ethical behavior as well, I believe makes a professional atmosphere. A Loan Originator without a good set of morals; would a Code of Conduct and/or Ethical Standards change the way this LO would conduct his/her business? This question is my concern with returning LO’s. At least with the new regulations in place, should sift out the riff-raff that infiltrated our industry over the past years.

  7. Hi Jan,

    Just a quick FYI: “all employees must adhere to the Ethical standards set forth by DFI”

    Government agencies like DFI do not regulate ethical conduct or set forth ethical standards.

    DFI regulates its laws and rules.

  8. Our written code of ethics as stated in the employee handbook known as the: THE BASICS

    BWL will not over promise and under deliver. It is our purpose to demonstrate service to others before oneself and to always protect the road leading to origination. We are committed to excellence in all we do by operating with diligence which is a learnable skill that combines creative persistence, a smart working effort rightly planned and rightly performed in a timely, efficient and effective manner to attain a result that is pure and of the highest quality of excellence

  9. Although my company does not have a written code of ethics being a licensed Real Estate Broker as well we all adopt the Realtor Code of Ethics and I apply that to me being a Mortgage Broker as well. You can find the code of ethics at http://www.realtor.org/mempolweb.nsf/pages/code. I do not belong to an association but I attend many continuing education classes most of which are live lectures put on by either the National Association of Professional Mortgage Woman or Washington Association of Professional Mortgage Woman. I keep up on current issues through DFI’s commissioner meetings. I am required to maintain 10 clock hours 2 of which are liability for my LPO license; 9 hours of hours for Mortgage Broker each year and 30 clock hours every two years for my Real Estate Brokers license.
    When Mortgage Originators return to the industry they will have to follow the Safe Act and either register or be licensed through the NMLS. Who knows, with the ever changing continuing education and licensing requirements they may have to complete more hours then we are having to complete now. I think it will vastly depend on if fraud is still rampant or if all of the regulation has forced LO’s to think twice before attempting fraud. I think with the stiffer penalties monetary and jail time, hopefully it will hinder them from doing so.

  10. This industry has long needed some minimum standards for LO’s. Anyone that is not willing to prove that they have mastered at least the basic knowledge is probably in the wrong career field. It is OK to know and understand your job. Education is the right way to go, its about time.

  11. No my company does not have a code of ethics; however it is up to me to hold myself and employees to a high ethical standard. I do not belong to a professional association within the mortgage community. When the scum of the lending industry do come crawling back I encourage them to find employment elsewhere and eventually enjoy their stay in jail for fraud!

  12. My company has a code of ethics in writting that I had to sign. No room for error. Make a mistake and I loose my job. Maybe that’s how all Companys and Brokers need to act. It would be a start. As far as professionalism in the mortgage business, where getting there. Being licensed and continued education and background checked and better product knowledge is a good start.

  13. Again, treating my customers ethicaly, fairly and professionaly with outstanding service has been a hall mark of my business. How else can I have run my business based only on referrals for 13 years? I think NAMB memebership should be mandatory for all brokers and we should be required to take an oath much like a physician’s oath to do no harm. But at the end of they day, when 1000 felons in Florida are originating, we are all talking about window dressing here.

  14. Arash, have you taken a look at the NAMB Code? It is pretty lame.

    How many of its members did NAMB kick out of its organization for unethical conduct?

    I believe the number is zero.

    No, NAMB is not the place to go. However, perhaps they will transform themselves. We will see. I

    Here’s how the NAMB Code reads now:

    NAMB members shall conduct business in a manner reflecting honesty, honor, and integrity

    NAMB members shall conduct their business activities in a professional manner. Members shall not pressure any provider of services, goods or facilities to circumvent industry professional standards. Equally, Members shall not respond to any such pressure
    placed upon them.

    NAMB members shall provide accurate information in all advertisements and solicitations

    NAMB members shall not disclose unauthorized confidential information.

    NAMB members shall disclose any equity or financial interest they may have in the collateral being offered to secure a loan.

    *****

    THIS CODE of ethics is very weak and is mostly just saying that NAMB members should follow the law. Why have a Code if you’re just restating law? The only code provision that talks about ethics is very sad:

    “NAMB members shall conduct business in a manner reflecting honesty, honor, and integrity”

    Reflecting…..to reflect. To me that means to look in a mirror. So if I just look like I’m being honest, to NAMB that’s ethical.

    That’s very, very sad.

    No, I don’t believe any member of the general public should make an assumption that NAMB’s Code of Ethics means anything.

    Furthermore, with NO enforcement mechanism, this is a worthless document for NAMB members.

    Look where NAMB sends consumers if they have a complaint about a mortgage broker:

    http://www.namb.org/namb/Home_Buyer_Complaints.asp?SnID=816484040

    They send you to each state’s regulator.

    NAMB seems uninterested in regulating the ethical conduct of their members. A pledge to NAMB is more like a pledge to a TRADE ASSOCIATION where they take membership dollars and fight congress on behalf of their industry.

    NAMB actually does this very, very well. So we should understand the purpose and role of NAMB (a trade group) and not confuse them for a professional association.

  15. My company is very small and does not have a code of ethics. However, I would like to think that we are honest and do a great job. And no I don’t belong to a professional organization within the mortgage industry, however I do attend CE, etc.

  16. As a company we do not have a code of ethics, as a person however, I do have a personal code of ethics and conduct. I think as an industry we should develope a code of ethics as we continue to develope our standards to becoma a LO or broker.

  17. My company does have a specific code of ethics but it is:
    • Build upon our professional standards of excellence
    • Seek to broaden our circles of influence and serve more clients with them
    • Continually educate ourselves, gaining knowledge and experience
    • Strive to serve those around you in a greater capacity

    Ethics and Integrity. Conduct your business in a manner that is above reproach. Treat all people, clients
    and co-workers with courtesy and respect. Earn respect of your co-workers and they will in turn be confident
    in your integrity and professionalism. What you say and do must be an honest reflection of reality and not just
    your perception, all points of view must be considered. Refrain from all slander and gossip and talk of preferential
    treatment within and outside of PC Home Loans’ walls.

    Knowledge and Ability. The success of your business is only limited by your own knowledge and work ethic.
    Accept the roles and structured limitations of others around you and find a way to partner together to have success.
    Continually develop as a business professional. Do your job thoroughly, accurately, efficiently and be consistently
    detail oriented.

    Team Oriented. PC Home Loans is an industry leader in large part because of the systems we have in place.
    Grasp the company systems and methods and utilize them. Understand and accept established office protocol
    for continued individual success. Embrace the team concept, and make others around you better.

    Communication. Keep your clients, referral partners and co-workers current on the status of all transactions.
    You must be clear, concise and thorough in your delivery. Never assume anything.

    Punctuality and Attendance. Show up on time for all staff and client meetings. Tardiness is unacceptable.

    Availability and Responsiveness. All calls are to be returned promptly. If you are inaccessible and
    can not meet this demand your voicemail greeting must reflect this reality.

    Dress and Attire. Men and Women are to wear business formal attire, comparable to pressed shirt and tie.
    All attire is to be highly conservative in nature and highly professional.

    Private and Public Workspace. Your office area is to be cleaned daily, free of clutter. It is of the up-most
    importance that all client documentation is put away.

    Fairness. Work with your clients to give them the absolute best rate and fees for their particular situation.
    Give them the same courtesy and respect you would want extended to yourself.
    I do not belong to a professional organization as I took time off to work charities and survive for a while.
    I would imagine that if anyone who was in this industry and returns in 2 years that they will face a “boot camp” like approach to retraining.

  18. Yes, my company has a code of ethics. It certainly helps ward of evil spirits that may want to be employed by our company. The ethics guide certainly gives one something to think about if keeping your job is of high importance on your lifes agenda.

    I think that most professionals are inherently ethical. Why go through all the knowledge based training and throw it away by not following the rules.

    I really believe new people coming into the business will be more seasoned as a professional. The get rich quick underwriting does not exist any longer. Individuals whom re-enter the profession will come with reserves and ample mortgage backgroung and training.

    I sincerely hope that all the new rules and regulations move us far away from the past indiscretions.

  19. I have no idea if my new broker has a code of ethics. It wasn’t provided during my hiring process and I have yet to do a loan since I made the change. I will ask about it. The best thing to come out of this will be that the industry will lose it’s slimey rap and we will be redeemed as the best and brightest professionals:) That will be what is left after the weeding out process and will help the industry re-gain it’s respect as real professionals offering a trustworthy service.

  20. My company does not have a written code of ethics. I do hold myself accountable for my actions and always work within an ethical background. I do hold a LUTCF designation for my Insurance Business. I believe that if some of the loan orginators that left return then they will have a hard time remaining in the field unless they change there ways.

  21. Code of Ethics,experience,and I really mean experience. You can’t logically expect to be hired a a SVP of lending and be given credit limits t approve loans of 5ML on behalso of the Bank, why a rookie LO ?? Hey do 5ml but know what you did, not just brag about the money see 5ml over 12 months is roughly 490K montlhy so you charge 4 pts over all that 196,000 yearly over the top take 1/2 put it in a fund not loose it save it until the Rookie has 5 years experience, see if they stay or go, they wouldn’t know if they worked for a bank so why is the LO highlighted to much greed no ethics, I have paid my dues for 40 years and am very very greatful but I still need to recall my ETHICS to move forwars this is a personal topic for me and I have a solution for lenders to think about I have supervised over 2k employess and can tell you if you use your ETHICS get your check book out, Ok enough of this?

  22. Questions.
    1) Does your company have a code of ethics? If so, post the link in the comment box and tell us if you think your company’s code has helped guide your (or your colleagues) as you’ve faced ethical dilemmas in your career.
    2) Do you belong to a professional association? (Example: NAMB, MBAA, NAPMW, NAMF, Mortgage Planners, and so forth) If so, find their code of ethics and read it. Could their code of ethics be improved? If so, how?
    3) The mortgage industry has lost thousands of loan originators over the past few years. Some will eventually return. When they do, what
    I’m not sure the company I worked has one, never see it. I belong to NMLS, yes, can find their code of ethics on web; I don’t see in near future, those LO would be back since the economy really goes down and getting worse.

  23. 1) Does your company have a code of ethics? If so, post the link in the comment box and tell us if you think your company’s code has helped guide your (or your colleagues) as you’ve faced ethical dilemmas in your career.
    A: No. We are a small Coorespondant lender that has a handful of loan officers that are hired by me directly, the owner. When hiring, I am looking for those individuals that carry a certain level of morale character with them and clearly know what is “right and wrong”. I look for people that won’t let things compromise their beliefs in regards to what is right and wrong. The definition of what is “right or wrong” is hard to define but I think it someone of sound mind can differentiate between what is right versus wrong.

    2) Do you belong to a professional association? (Example: NAMB, MBAA, NAPMW, NAMF, Mortgage Planners, and so forth) If so, find their code of ethics and read it. Could their code of ethics be improved? If so, how?
    A: Yes, I belong to the Master Builders Association and they do have a code of conduct that seems pretty generic, but then again so do most others as it is very hard if not impossible to determine what is morally right or wrong. Ethics are defined differently by each individual and depending on upbringing, education, and prior experience, everyone’s definition will be different. Therefore, a standard “code of conduct” is absent from my company due to this reasoning.

    3) The mortgage industry has lost thousands of loan originators over the past few years. Some will eventually return.
    A: The reason most loan originators are gone now over the past couple of years is due in large part because of them taking short-cuts and committing fraud. I always thought that this industry was crazy to not require licensing of originiators especailly when real estate agents and escrow officers were required to. Matter of fact, I made all of my loan officers take the state brokers test just so we could market to the public that all of the originators here at Communtiy One were licensed mortgage brokers.
    People (loan officers) willing to take that extra step proves to me taht they are treating this as a Profession or Career and not just a means to make money and will therefore apply proper ethical standards by which to grow their business as well

  24. ) Does your company have a code of ethics? If so, post the link in the comment box and tell us if you think your company’s code has helped guide your (or your colleagues) as you’ve faced ethical dilemmas in your career.

    We do not have a formal code of ethics, but instead on every closing our clients are asked to fill out a customer survey to ensure that as the “mortgage professional” we are providing our clients with the service and expertise that is expected. As a small correspondent lender we strive to put ourself apart from the big lenders with superior service and knowledge to make accurate decisions.

    2) Do you belong to a professional association? (Example: NAMB, MBAA, NAPMW, NAMF, Mortgage Planners, and so forth) If so, find their code of ethics and read it. Could their code of ethics be improved? If so, how?

    I do not belong to any of the local and national Mortgage Banking associations. When I initially became a loan officer I attended those functions, but found them to be a waste of my time. Our parent company keeps us well informed with changes in the industry.

    3) The mortgage industry has lost thousands of loan originators over the past few years. Some will eventually return. When they do, what
    I doubt we will see this industry as it was 4 years ago, and with the liscensing requirements, state and national tests, and now back ground checks, it will be difficult for many to enter this profession in the future. It will eliminate the part time loan officers that we often a large part of the black eye given to our industry.

  25. If the company i work for has one I do not recal seeing it unless it is in the Employee Handbook I was given tha ti honestly did not read. I can tell you the my boss is one of the most ethical people I know and I admire him for this. His reputation in this industry proceeds him. I have the up most respect for him and how he runs his business. I also hold a license as a Notary Public of the state of Washington for over 8 years and is expected to be ethical with this positon I carry. I am also a member of the National Notary Association and regulary get articles on ethcial situations. I feel with all the new licensing requirements and back ground checks that those who are looking to make a fast buck will no longer consider this profession anymore.

  26. 1) Does your company have a code of ethics? If so, post the link in the comment box and tell us if you think your company’s code has helped guide your (or your colleagues) as you’ve faced ethical dilemmas in your career.
    A: No. We are a small corresondent lender and do not have a formal ethics code. However, I know everyone in the offcie does have a strong sense of what is right and what is wrong. I think that’s the bottom line. When it comes right down to it, pledging alleginace to a moral code is a waste of time. Those that are moral will be moral and probably out do the requirements in any code. Those who are not, will continue to do what ever they feel is in their best interests. The only good thing that could come from it would be the ability to revoke a license if the code was broken. Proving it is another thing entirely and probably close to impossible, but at least the would be a starting point.

    2) Do you belong to a professional association? (Example: NAMB, MBAA, NAPMW, NAMF, Mortgage Planners, and so forth) If so, find their code of ethics and read it. Could their code of ethics be improved? If so, how?
    A: No, I do not at this time. I’ve been asked to joing several, but all they ever seem to want is your yearly dues . . . I have never felt the need to join up on moral grounds.

    3) The mortgage industry has lost thousands of loan originators over the past few years. Some will eventually return.
    A: True, some may return, but it will be a small percentage. Those that are gone were never professionals to begin with and are better served in another industry. I do beleive that licensing is a positive step and that the professional LO’s will always support licensing as it’s one way to keep out those people looking for personal gain rather than the good they might be able to offer a potential buyer. I am not saying profit is bad, far from it. But I am simply saying those that are gone, probably left when the chance for “easy” money was taken away. What’s left are those of us who were in the business long before stated income loans or no ratios loans were even a remote possibility and those younger LO’s who really want finance to be their profession. That’s a good thing.

  27. No, my current company does not post a general code of ethics. However the message is present by all who work there. All are committed to conducting business at the highest level of ethics, complying with laws rules and regulations. I don’t feel it needs to be posted, but simply practiced and enforced from the top down.

    No, I currently do not belong to a professional association as those listed

    No, I don’t believe they will return. My opinion is many working individuals jumped into mortgage lending 9 years ago because it was an easy way to make a buck. The general practice of mortgage lending was easy to dictate, there was no formal training/education, there were no requirements of job knowledge. Funny that there were many rewards for volume and not customer surveys.If you were lucky, you found an ethical originator to work with. The profession of loan originator is evolving and that takes commitment from a true profession to meet and exceed today’s growing expectation.

  28. No we do not have a written code of ethics. As a Loan Officer my code of ethics is my book of business. I feel if I am unethical, my business would suffer. I have many many repeat clients and get more referrals from my cliets than I do agents. I also have a great support staff and employer who also helps if I am on the edge or need a second opinion on something. I feel in my office we all monitor each other and work as a team to provide the best loan for every client. We are a small company and work hard for every client. We also have customer serveys clients complete spelling out many levels of service provided. I love to get those back.

    I currently do not belong to any professional associations. I do not feel the need. I have in the past but it seems it is not as effective as the things I do on my own. I found the meetings were social gatherings with one thing in mind, getting an award, not to help better someones life or help the community.

    We have lost so many Loan Officers this last couple of years and it is a wonderful thing. Most of those people were in it for the money only. They did not care about helping people, only in making the loan. They are the ones who put people into things like option arms, in my optinion the worst loan ever to come into our industry. They sold the loan as an option but also sold the smallest payment. I hate that there are people, and i have met many, who are so upside down in their home they have no option but to walk away. Those LOs have ruined peoples lives and I bet if you looked, were paid huge checks by increasing the rates. I believe the LO license was way overdue. Had we all been licensed years ago, maybe we would not be in the mess we are in now.

    I like that things are now back to basics like when I started 14 years ago before sub-prime and magic loans. People need to show they can pay the mortgage payments, sadly not everyone deserves a home at the time they want one. The need to show the ability to make the payments. I am glad that there are ways to get people in for little or no money but I am so glad that they now have to prove income to pay the mortgage and still be able to survive. All people deserve a home, just sometimes it is not when they want it, they need to earn it again like years past.

    I do not believe those loan officers will come back into the industry, they hurt to many people and lost their credibility. You can’t distroy lives and make a comeback. They are gone forever.

  29. We do not have a written code of ethics. I agree with the comment above mine…I have so many referrals. To me this speaks for itself. I am enjoying the fact so many people have moved and left the lending to the loan officers that enjoy this job and put the client’s needs first. I am not a memeber of any of the above orginizations and things are going fine for me.

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