Mortgage Loan Originator
MODEL CODE OF ETHICS
Written by Washington State Mortgage Loan Originators
2016 DRAFT: FOR INDUSTRY REVIEW
This Code of Ethics has been created by Loan Originators in Washington State so any mortgage lending professional association can adopt this Code, provided the association holds its members accountable to the standards set forth in this Code.
This Code of Ethics creates common and clear standards of practice that requires loan originators to self-regulate our industry in a manner that is beneficial for the public, our clients, our community, and the mortgage industry.
This Code shall apply to all Loan Originators with the _________ Mortgage Association. Upon receiving a Loan Originator license, membership in a mortgage lending association that self-regulates ethical conduct is mandatory and all members agree to follow the Code of Ethics.
The purpose of the Code is to create, develop, and refine standards of practice that improve and unify our profession, and to enforce these ethical standards, resulting in increased consumer confidence and a high quality of mortgage loans.
In order to fully recognize Loan Originators as “Professionals,” the industry has defined the ethical duties we have to the public, to the profession, to clients, and to our competitors. There is a difference between professionals and non-professionals in the allocation of ethical duties to clients. As professionals loan originators owe fiduciary duties to clients.
Members of the ________Mortgage Association will work together to maintain and improve the ethical standards of practice in our profession. We agree to conduct business in a fair and honest manner. No current or future inducement or incentive of profit or other personal gain can justify a departure from the standards we agree to follow.
We recognize and accept responsibility that our clients rely on our expertise, our honesty, and our guidance in the financing of residential real estate.
We pledge to provide the highest quality service possible to earn the confidence and the trust of our clients. We hold our Association’s reputation for honor, integrity, and respect in high regard and we pledge to protect and enhance it.
This Code of Ethics creates duties that may be higher than those required by law, thus when there is a conflict between the Code of Ethics and the law, the obligations of the law must take precedence.
We hereby pledge to conduct our business in accordance with these standards and by adhering to this Code we will pursue the following goals:
- Strengthen the public trust of the mortgage lending industry;
- Implement and develop ethical business practices among members;
- Inform our members of changes in mortgage laws and lending practices, as well as pending local, state, and federal legislation effecting the industry;
- Partner with public and private agencies in the development and elevation of standards of practice.
- Strive for continued education on product knowledge in order to serve our clients with the highest level of professionalism.
The Members of the ________ Association are aware that the success and future of the mortgage lending industry depends on the honor, integrity, fidelity, and good character of its members. Each of us resolves to uphold the following standards of conduct when dealing with the public, clients, and fellow industry professionals.
DUTIES TO THE PUBLIC AND TO THE PROFESSION
Association Members have the duty of professional competency. They must meet formal federal and state licensing requirements as well as pre-licensing education and continuing education requirements. They must also take personal responsibility by keeping up to date on regular, ongoing changes within the industry. This requires mortgage lenders to generously share with fellow Association Members their knowledge and expertise, and to respond positively to the requests of others, who are striving to learn from them. Members will strive toward higher levels of competency within the industry. The level of service provided shall be what is expected in the lending community. Specialized services outside one’s areas of expertise and competence require assistance from those who have the requisite expertise.
The actions of Loan Originators shall conform to standards of all applicable laws and regulations including the duty to report suspected mortgage fraud. Association Members shall strive to assist government entities in order to establish, maintain, and develop a fair and efficient infrastructure for the industry.
Association Members have a duty to be honest in their representations to all parties including the public. This includes all methods of advertising. This duty requires that all assertions are true. It also requires that sufficient information be disclosed to the degree required for a reasonable person to make a rational decision with regard to a loan program.
The above duties set forth in Article 3 are extended to include lead generation. Association Members agree not to purchase leads from lead generation companies that advertise in a dishonest and deceptive manner. No loan originator shall use a lead generation company without prior receipt and review of the advertisements used to procure the leads. Loan originators must make sure that the advertisement used to procure the lead follows all state and federal laws governing mortgage lending. Fine print is not sufficient to overcome a deceptive ad. All lead generation advertisements must be in compliance with the Dodd Frank Act rules on Unfair, Deceptive and Abusive Acts and Practices, and applicable state law.
Association Members shall not discriminate in the selection of clients, employees, vendors, or real estate brokers in the practice of mortgage lending and in the presentation of loan products, rates, terms, and fees, or in the granting of a loan, based on race, color, sex, religion, family status, marital status, national origin, age, disability, sexual orientation, gender identity, or any other protected category of person under federal or applicable state law.
With support of reasonable suspicion and tangible evidence, Association Members shall report unethical practices in writing to the Professional Standards Committee.
DUTIES TO CLIENTS
A “client” is any current or prospective customer and this relationship begins as soon as an Association Member starts communicating with or processing any paperwork for a potential customer that is related to a prospective loan transaction.
The relationship between an Association Member and a client is one of trust. As such, each member has a duty to protect the best interest of his or her client. Loan Originators must act in the highest good faith and never put one’s own personal interest above the interest of one’s client.
The relationship between an Association Member and client is fiduciary. Association Members must put the client’s best interests ahead of his or her own interests. A client’s ability to repay a mortgage obligation out of known resources within the term of repayment must be the paramount consideration in the decision to extend credit. This obligates an Association Member to a fiduciary duty to carefully probe into the past, current, and expected future financial circumstances of his or her client or prospective client.
Honesty is required at all times. Misrepresentation of facts is unacceptable. The intentional omission of material facts is considered dishonest. Complete and full disclosure is the standard. Loan Originators may not quote interest rates or other loan terms to a prospective client that are not known to be available for that client.
Loan Originators shall carefully explain all details and facts. Further, there is an affirmative duty on the part of Loan Originators to confirm the understanding of these facts with his or her client. Loan Originators realize that generally, consumers know less about mortgage lending than we do, and that all clients can rely on his or her Loan Originator to explain any and all questions, issues, and facts.
Association Member shall not disclose any information that has been obtained in the course of providing services to clients except if such disclosure is made with the written knowledge of a client, unless an Association Member is required to do so under law or regulation. Each Association Member must take personal responsibility to ensure this confidentiality. Company owners and managers must also assume responsibility for employees in this regard.
An Association Member must not use for his or her own benefit, or permit to be used for the financial benefit of others, any information that has been obtained, or knowledge that has been gained, in the course of providing services to clients.
Loan Originators are responsible for their support staff. Staff members play an important role in the culmination of a transaction and are regularly privy to important information about each client. As such, support staff must also abide by this code of ethics. Mortgage Loan Originators are responsibility for the acts of assistants who work for them.
If an Association Member has any interest in the transaction other than fees for service, this is considered a relevant and material fact and must be disclosed. If anyone else in the Association Member’s office or personal life has such an interest, he or she must disclose it to his or her client. Association Members must always inform clients of the nature of any business connections, interests, or affiliations that might impact the objective quality of their services.
If, in an Association Member’s best judgment, his or her client could benefit from consulting another professional, for example a lawyer, financial consultant, or accountant, this recommendation must be made to his or her client in a timely manner. However, an Association Member shall not recommend uses of services in which he or she has an interest without disclosure of interest.
DUTIES TO COMPETITORS
Association Members shall cooperate with other professionals who may be involved in a transaction except when it is not in a client’s best interest. There is a presumption that cooperation is in the best interest of a client.
An Association Member must not knowingly or recklessly make a false or misleading statement about a competitor.
Clients have the ability to shop for a mortgage and to cancel their transaction at any time, if they believe it to be in their best interest.
An Association Member must not interfere with any current lending transaction in process between a consumer and another Association Member. This prohibits the sending of advertisements, by any media, to consumers who are in a current transaction with another Association Member. This does not prohibit the solicitation of business from a consumer who currently has a transaction with another lender, as long as the solicitation is part of a normal, customary advertising campaign and not part of a plan to directly persuade that customer to transfer an existing loan in process to the soliciting company.
If an Association Member moves to another firm, he or she must not attempt to persuade clients to move a transaction in process to the new firm.
ARBITRATION AND GRIEVANCE PROCESS
If charged with unethical practice or asked to cooperate in a proceeding, an Association Member shall provide facts and not obstruct processes. An Association Member must not disclose information from ethics hearings in which they are involved. An Association Member must cooperate with a professional standards proceeding and strive to maintain a professional decorum.
Association Members agree to submit to the grievance process, the procedures and rules.
This Code of Ethics was originally adopted on ___________ and will be amended from time to time by referendum to the members of _________Mortgage Association. It is not intended to replace any applicable state or federal law. Instead, it strives for standards that are higher than those spelled out in the law.
CE Forward, Inc.
First Draft: ©2008
Second Draft ©2009
Third Draft ©2011
Fourth Draft ©2013
Fifth Draft ©2014
Sixth Draft ©2015