The essence of professional status requires one to take a licensing exam which tests substantive knowledge and codified standards of practice. Currently, the mortgage origination industry is in a state of transformation because, although loan originators working under a mortgage broker and non-depository lender must pass licensing exams, loan originators who work for depository banks are not required to do so.  A brief historical review of standards of practice indicates that the designation of mortgage originator is moving towards a clearly identifiable status as a profession.  We in the industry can now move mortgage originators clearly into professional status by implementing competency exams for all LOs and disciplinary procedures, once a code of ethics with sanctions is formally put into place. Until then, we revert to using general ethics in the workplace.

General ethics attempts to provide a rational framework for answering the paramount moral question “What ought I do?”  We all struggle with this question every day in all contexts, and we attempt to find answers through emotion, intuition, authority figures, religion, and hopefully, reason.  In answering these questions, we attempt to construct common and objective frameworks of values in order to solve these problems in a consistent fashion.  This gives our lives coherence and unity as we strive toward ethical ideals.  In contrast, the problems of professional ethics in a business setting, emerges from highly unique structural domains and thereby carry with them modified sets of values.  For example, in the criminal justice system there are specific players that play specific roles in that structure and the overlying value for lawyers is to protect the constitutional rights of clients. In the healthcare industry physicians have duties of informed consent to patients, and while doing no harm to the patient, they must also respect patients’ rights to self-determination.

We infer that anyone who is officially designated as a professional also has fiduciary duties toward his client.  Fiduciary duties arise in any circumstance where one person has greater authority, power, or knowledge than their client. This carries with it the duties to act in the highest good faith and to never put one’s own interests above the interests of any client with regard to the subject matter of their contractual arrangement.  Being designated as a professional carries correlative burdens and benefits.  One benefit is that a professional has greater industry prestige and greater earning power. A corresponding burden of this fiduciary duty is that there is a greater responsibility to protect the interest of clients.

At this point in time, we cannot assume a mortgage originator is a) a professional (which triggers a different set of ethical considerations than general ethics and b) is a fiduciary and as such owes duties of the highest good faith to his client.  Furthermore, this would imply that the mortgage originator also has the affirmative duty to ensure his subordinates are also protecting those fiduciary duties.  In some states, laws have been passed that designate a mortgage brokers and the loan originators licensed under the broker to owe fiduciary duties to their clients but this is not the case in all 50 states for all loan originators no matter where they work. Instead we would classify loan originators as an emerging profession.

It is not clear that an individual not officially designated as a professional owes fiduciary duties to clients, though many courts have held loan originators to a fiduciary standard during the last decade as borrowers attempted to balance the scales of justice after becoming victims of predatory lenders.  (See “Mortgage Brokers-What Fiduciary Duties Exist? By Andrea Lee Negroni, Mortgage Banking Magazine Oct 1, 2007.) Typically non-professionals deal at arm’s length with their clients. In this case, consumers do not expect that their mortgage loan originator is not self-interested in their dealings, which necessitates the need for broker shopping in order to get the best deal, yet many borrowers did believe the loan originator was working on behalf of the borrower when no such duty existed.

If a mortgage originator does not have professional status that results from national competency examinations and being held to a code of ethics with sanctions, then there is no good reason for a consumer to expect any kind of special duties above and beyond those prescribed by law.  The expectation again is that both parties are operating at arm’s length and the consumer must be held accountable for his choice in mortgage originators.  In situations where the mortgage originator does not have official professional status, the operative rule continues to be “caveat emptor.” In contrast, in situations where the mortgage originator has official professional status, the operative rule shifts to “caveat venditor.”

Frequently, all professionals face conflicts between professional obligations and their own personal senses of morality.  For example, a pharmacist may have to respect his clients wish to purchase a Plan B Emergency Contraception even though he is personally opposed on moral grounds.  While we do not intend to provide any definite answers to these sorts of conflicts that occur, we can offer some account of some of the moral considerations that go into thinking through these sorts of conflicts.

There are two ways that professionals can approach ethical problems.  One is called holism and the other is called separatism.  Holism is an approach that implies that one has an absolute set of standards that applies to all contexts and domains of one’s life.  In contrast, separatism means that a moral agent separates and isolates the moral domains of his life.  He does not have one single set of moral standards that applies in all contexts.  He may have a different set of standards for strangers, a different set of standards for home, and an even different set for work, especially because there may be a written code of ethics at work to which he must abide.

For example, many states have consumer protection statues within their mortgage loan originator licensing laws requiring a duty of honesty to all parties.  By becoming a loan originator that person agrees to abide by that absolute rule.  In comparison, that very same person, in his personal life, may have adopted a rule concerning telling the truth that allows occasional deviations if the consequences so warrant.  This person then is adopting the strategy of separatism because he is rigidly separating moral domains of his life with different moral rules.  Another individual, however, could follow the approach of holism by maintaining an absolute rule of lying in all contexts of his life if it is in his best interest to do so.  If one’s professional, ethical standards are vague and ambiguous, it is difficult, if not impossible to be a separatist.  This is so because there is no clear rational way to separate one’s professional moral obligations from one’s general moral obligations.  This, then, throws one into a holist approach, which leads to subjectivism and thereby risks an “anything goes” policy.  Moral chaos ensues.

Due to what we believe was a deficient motivational structure, rampant violations and the resulting public outcry, mortgage originators are now facing severe externally-imposed federal regulations which are quickly worsening the situation of a typical mortgage originator and business owner.

The National Association of Mortgage Broker Code of Ethics, while it mandates that members shall conduct business in a manner reflecting honesty, does not go far enough in clarifying what honesty means.  This allows a wide number of interpretations of honesty and unfortunately, because there is no precise definition of honesty there is no objective standard to which members can be held.  This is the very problem in this industry. Because code provisions are expressed with great ambiguity they are susceptible to moral subjectivism, which means that ultimately just about anything goes and the “anything goes” policy has caused huge amounts of political and legal machinery to gear up to create external regulations of our industry.  Laws come with far more serious sanctions than we would mandate through continuing education, disciplinary proceedings with retraining, and so forth, which we believe will be less efficient and will decrease industry profits.  The mortgage lending industry has a choice: We can either proactively, internally regulate ourselves with the attempt to educate, train, and improve the moral fiber of mortgage originators, or else we will risk constant and even greater external regulation by various legal bodies.

We believe the best way to elevate the moral fiber of any industry is to develop and provide an ethical structure of motivation for our industry that is not dependent on external rewards or punishments but instead helps loan originators develop a system of internal rewards based on ethical virtue, duty, and consequences.

NAMF is writing such a code. Contact Jillayne Schlicke for more information: 206-931-2241

Portions of the above article were originally published in Mortgage Originator Magazine in 2001 and authored by Kevin Boileau, Ph.D., and Jillayne Schlicke, M.A.

Loan Originator continuing ed classes to be taken during calendar year 2012 are on the way! The WA State Law CE course has been submitted and I’m working on your brand new 8 hour course this weekend.  Just like last year, former students are able to receive an early student discount when you take your class during June, July, and August but once September rolls around, prices will go back up.  When the courses have received official approval, I will begin scheduling classes to take place across the greater Seattle/Puget Sound Region. If you want me to teach a class at your office or in your city, give me call –> 206-931-2241 or send an email to jillayne at ceforward dot com and we’ll talk.  The most popular training days of the week are T, W, and Th and the dates at the beginning of the month are very popular and get booked up fast.  Looking forward to seeing you all again this year! ~ Jillayne

This is the required course needed during 2012 to renew an expired LO License

LATE CE 8 Hr SAFE Comprehensive NMLS Approved Course Number 2716 (approved in all 50 states)
LATE CE 1 Hr WA State Law CE NMLS Approved Course Number 2715
 
Course Description:
4 Hours Federal Law
2 Hours Ethics, Consumer Protection, Fraud, Fair Housing
2 Hours Non-Traditional Lending
1 Hour WA State Law
In this course we will review the Federal Reserve Board’s rules on loan originator compensation prohibitions and the Dodd-Frank Reform Act including the new Consumer Financial Protection Bureau, LO compensation limits coming under Dodd-Frank, and definitions of non-standard loans, high risk loans, and qualified residential mortgages (QRMs).  In addition we will:

Learn why overages and yield spread premiums have been deemed unfair
Become aware of how unethical business practices can result in legal consequences
Understand the new “duty of care” required by loan originators
Learn about the most recent HUD Fair Housing proposed protected class

Schedule of upcoming classes
End of Course Evaluations

“Because the participants were far more experienced than me, I learned a great deal.”
“Very informative about the upcoming law changes. Loved the ethics case studies.”
“Kept my interest for the whole 8 hours. Good case studies, which I enjoyed the most because they tie the federal law changes together with the reasons WHY we have the new laws.”
“Case studies are an added benefit.”
“Fantastic, interactive class. Loved learning more about the FRB and Dodd Frank Act.  The coming changes are crazy and our industry has to get our head wrapped around them ASAP. Glad I came to class.”
“Excellent discussion/lecture mix with group time and case studies showing us real court cases that resulted in our new laws.”
“Jillayne is excellent in explaining the issues and keeping participants on track/on topic.”
 .

Here’s a great article on the Eurozone crisis….and be sure to read Calculated Risk daily for Eurozone updates.

Here is the consumer access page of the NMLS

Do you want to give the CFPB input on the new GFE/TIL? Here’s your chance.

More on Short Sale Fraud from Fannie Mae.

…and info on how to contact Jim Siwek from the HUD OIG office.

More reading material on QRMs

There was a great 60 Minutes episode this past Sunday that featured interviews with EVPs of Countrywide who were whistleblowers.

and it was recommended by a student that we check out the documentary film House of Cards.

Here is mandatory reading material for those who still are clinging to the myth that the Community Reinvestment Act and Fannie/Freddie are responsible for the meltdown.

Here’s that article I mentioned about women paying more for a mortgage v. men because women tend to be more trusting.

Shawn Portmann article here.

More film recommendations:

Inside Job
—-
Margin Call

—–

Roger shared a Seattle Times link that provides access to graphs and charts on our local economy.

Here’s more info on how homeowners can apply for free legal aid from the WA State Bar Assoc.

Info on homeowners underwater can be found here.

We talked about a great 60 Minutes episode this past Sunday that featured interviews with EVPs of Countrywide whistleblowers.

Todd mentioned a book called The Creature from Jekyll Island...

Here’s the WA State Foreclosure Fairness Act and here’s the new WA State Foreclosure Resource GuideThis is a VERY GOOD PDF for distressed homeowners.

Here’s a link to the WA State Bar Association where financially struggling homeowners can apply for free legal aid.

There was a request for information on early payment default within the Alt-A market

AND we also wanted to check on the default rate of USDA loans…looks like it’s under 2 percent!

There was a question about bank fraud and shouldn’t we hold the bankers accountable for the mess? YES indeed, there are folks out there who agree with that.  Read what Bill Black has to say about this topic here.

Here’s a great article on the Eurozone crisis….and be sure to read Calculated Risk daily for Eurozone updates.

Here is the consumer access page of the NMLS

Do you want to give the CFPB input on the new GFE/TIL? Here’s your chance.

More on Short Sale Fraud from Fannie Mae.

…and info on how to contact Jim Siwek from the HUD OIG office.

More reading material on QRMs

Here’s an interesting study I read last night about investors and their contribution to the housing bust.

Here’s the WA State Foreclosure Fairness Act and here’s the new WA State Foreclosure Resource GuideThis is a VERY GOOD PDF for distressed homeowners.

Here’s a link to the WA State Bar Association where financially struggling homeowners can apply for free legal aid.

There was a question about bank fraud and shouldn’t we hold the bankers accountable for the mess? YES indeed, there are folks out there who agree with that.  Read what Bill Black has to say about this topic here.

Here’s a great article on the Eurozone crisis….and be sure to read Calculated Risk daily for Eurozone updates.

Here is the consumer access page of the NMLS

Do you want to give the CFPB input on the new GFE/TIL? Here’s your chance.

It’s beyond time to stop blaming Fannie,Freddie, and the CRA for the meltdown. From the NY Times:

“1. The Community Reinvestment Act of 1977 was irrelevant to the subprime boom, which was overwhelmingly driven by loan originators not subject to the Act.

2. The housing bubble reached its point of maximum inflation in the middle years of the naughties.

3. During those same years, Fannie and Freddie were sidelined by Congressional pressure, and saw a sharp drop in their share of securitization.”

Read more here.

Here’s the news story about women paying more for a mortgage loan because they tend to trust their loan originator.

Read more from Seattle Bubble about local Puget Sound foreclosure statistics and how the WA State Foreclosure Fairness Act is slowing down foreclosures.

Q: Is there Errors and Omission Insurance available for loan originators?

A: I did a simple google search and found that some states are requiring this, and it’s codified inside their state law.  So it does exist, state by state.

We talked about a great 60 Minutes episode this past Sunday that featured interviews with EVPs of Countrywide whistleblowers.

Here’s the final Consent Order against Paramount Equity….and the press release regarding the company’s owners.

More on Short Sale Fraud from Fannie Mae.

Westsound Bank Story…

Dec 6: Bellevue
Dec 8: Seattle
Dec 14: Bellevue
Dec 20: Bellevue
Dec 28: Bellevue

Parking is free or validated at all locations. Lunch may be provided by a vendor. Details will follow via email after registration.

Full schedule and info on how to register here.

Read about the class here.

“Because the participants were far more experienced than me, I learned a great deal.”

Here’s more info on the solvency question regarding the FHA Mortgage Insurance Fund.

Here’s the site that lets the user see which lenders have the highest FHA default rates in a particular state.Go to “early warnings.”  By the way, the banks want this site/tool removed.

I promised a link on a local loan originator who is accused of running drugs.

Here is the consumer access page of the NMLS

Do you want to give the CFPB input on the new GFE/TIL? Here’s your chance.

Here’s the final Consent Order against Paramount Equity….and the press release regarding the company’s owners.

Here’s the follow up from class today.

Here’s more info on the solvency question regarding the FHA Mortgage Insurance Fund.

Here’s a great article on the Eurozone crisis that’s very easy to understand.

Here’s a link to the WA State Bar Association where financially struggling homeowners can apply for free legal aid.

There was a question about how Freddie Mac is determining appraised values. I found an interesting article on that topic.

Here’s the statistics on Trustee and other deeds showing that foreclosures are slowing down in WA State due to the new law…but will likely ramp up again next year.

Here is the consumer access page of the NMLS

Do you want to give the CFPB input on the new GFE/TIL? Here’s your chance.

Jim Siwek mentioned a link to the HUD OIG website. The Report to Congress shows up on the right hand side of the page.

I have asked DFI if they will still accept anon whistleblower complaints from us and will post the answer here when they respond to my email.
Update 1: DFI just responded that YES they WILL accept anon complaints. Here’s the form.

Here’s the final Consent Order against Paramount Equity….and the press release regarding the company’s owners.

Here’s the WA State Foreclosure Fairness Act and here’s the new WA State Foreclosure Resource GuideThis is a VERY GOOD PDF for distressed homeowners.

Here’s a link to the WA State Bar Association where financially struggling homeowners can apply for free legal aid.

Here’s the statistics on Trustee and other deeds showing that foreclosures are slowing down in WA State due to the new law…but will likely ramp up again next year.

And I just read this news story about delinquencies and foreclosure numbers.

There was a question about the percentage of homes in the U.S. that are owned free and clear. Here’s the answer from Economist Tom Lawler.

I promised a link to a website that has lots of youtube videos from an econ professor explaining ideas on how to fix things….such as the economy.

Here is the consumer access page of the NMLS

Do you want to give the CFPB input on the new GFE/TIL? Here’s your chance.

Here’s the Core Logic Short Sale Fraud report along w/case studies.

There was a question about bank fraud and shouldn’t we hold the bankers accountable for the mess? YES indeed, there are folks out there who agree with that.  Read what Bill Black has to say about this topic here.

FHA loan volume post bubble info can be here.

Learn more about the problems in Europe here.

When the topic of blame comes up, lots of us in the mortgage lending industry always seem to want to point towards someone else instead of taking a look at our own role as loan originators, processors, underwriters, and so forth.  One thing I constantly hear is how it was the fault of Fannie Mae and Freddie Mac for lending money to subprime borrowers. First of all, Fannie and Freddie don’t lend money and second, that myth has already been debunked here and here.

Michael Bloomberg publicly blames Congress for passing laws encouraging Fannie and Freddie to do the same.  Read how ignorant that position is right here.

Others blame the Community Reinvestment Act saying the Act forced banks to make mortgage loans to subprime borrowers. Sorry folks, the CRA has been around since the 1970s and is not to blame for the real estate bubble and the meltdown.  Read why here. Most of the subprime loans made were originated by people not subject to the CRA.

It’s beyond time to stop blaming others and to take accountability for what we can do as a collective group of individuals so we can move forward.

Here’s the WA State Foreclosure Fairness Act and here’s the new WA State Foreclosure Resource Guide This is a VERY GOOD PDF for distressed homeowners.

Here’s a link to the WA State Bar Association where financially struggling homeowners can apply for free legal aid.

Here’s more info on that WSJ Story about a possible new refi program coming for underwater homeowners.

Do you want to give the CFPB input on the new GFE/TIL? Here’s your chance.

Here‘s the article Steve mentioned about Elizabeth Warren taking credit for the Occupy Wall St movement. It’s a great article. Thanks for bringing this up, Steve! Excerpt:

“Elizabeth was making the point that she has been protesting Wall Street’s practices and policies for years – and working to change them,” said a spokesman for the Warren campaign in a statement intended to clarify.   ”Wall Street’s tricks brought our economy to the edge of collapse, and there hasn’t been any real accountability. She understands why people are so angry and why they are taking their fight to the street. She has said repeatedly everyone has to abide by the law. Elizabeth is working for change in a different way, to take this fight to the United States Senate.”

Here’s a reference to the question about how much of the TARP funds AIG paid back.

Here’s the SEC press release regarding the fine levied against Goldman Sachs…the highest fine levied in SEC history.

Here’s the Core Logic Short Sale Fraud report along w/case studies.

Here’s a link to the WA State Bar Association where financially struggling homeowners can apply for free legal aid.

Here’s more info on that WSJ Story about a possible new refi program coming for underwater homeowners.

Do you want to give the CFPB input on the new GFE/TIL? Here’s your chance.

The CFPB has released their new examination manual for how they’ll be regulating non-depository lenders and brokers.

Here’s the Rob Wolverton indictment.

Here’s the story about the indictment of Shawn Portmann…and the Seattle PI story

Here’s Rhonda Porter’s twitter account, which provides a great example of how to follow the new WA State DFI advertising rules….and here’s Rhonda Porter’s facebook page

There was a news story showing up on the screen at the beginning of the class about the possibility of a new refi program. Here’s that story.

Here’s CR’s Graph Gallery. The menu runs left to right across the top of the page, just under CR’s logo.

Here’s the WA State Foreclosure Fairness Act and here’s the new WA State Foreclosure Resource Guide This is a VERY GOOD PDF for distressed homeowners.

Here’s the Final Rules from the FRB on LO Comp

Here’s the follow answer on compensation:

Do you want to give the CFPB input on the new GFE/TIL? Here’s your chance.

The CFPB has released their new examination manual for how they’ll be regulating non-depository lenders and brokers.

Here’s a link to the WA State Bar Association where financially struggling homeowners can apply for free legal aid.

Here’s Rhonda Porter’s twitter account, which provides a great example of how to follow the new WA State DFI advertising rules.

Here’s the story about the indictment of Shawn Portmann…and the Seattle PI story Tom referenced.

There was a question about taking rent and not making a mortgage payment and is this a problem? Yes, it meets the definition of equity skimming. Read more here.

and another recent article asking the question: Should All Short Sale Negotiators be Banned?

Here’s the FTC ruling on MARS (mortgage assistance relief service provider rules)…these would be the loan mod guys that Bozena was talking about.

Here’s the DFI “naughty” list.

Here are two articles about MILA that we talked about.

There was a question as to whether people who are required to take a class on homeownership have a lower default rate (especially with those first time homebuyer programs.) I have emailed Lisa DeBrock with the WSHFC and will post the answer in the comments.

There was a question as to whether the Community Reinvestment Act forced Fannie, Freddie and banks to make loans that eventually lead to the meltdown.  Here is some research for you by Nobel Laureate Economist Paul Krugman disputing this claim…and an excerpt from an interview:

Watertown, Conn.: Do you agree that the Community Reinvestment Act (CRA) is the cornerstone of subprime lending, the root cause of financial meltdown?

Paul Krugman: No, and I’m glad someone brought that up. CRA has been in existence since 1977; plus, it only applies to depository institutions (regular banks). Meanwhile, we had a subprime bubble that mostly took place after 2002, with most of the loans made by institutions that weren’t subject to the CRA.

That’s why everyone who’s looked at this honestly says that the Community Reinvestment Act had nothing to do with the crisis.

The attempt to blame it all on the CRA is just an attempt at blame-shifting — an attempt to make liberals and nonwhite people the villains of a story that is actually about runaway financial institutions and the free-market ideologues who refused to regulate them.

Next, it looks like the CFPB has released their new examination manual for how they’ll be regulating non-depository lenders and brokers.

Do you want to give the CFPB input on the new GFE/TIL? Here’s your chance.

Here’s Rhonda Porter’s twitter account, which provides a great example of how to follow the new WA State DFI advertising rules.

Here’s the story about the indictment of Shawn Portmann…and the Seattle PI story

Here’s the deceptive “Lower My Bills” website.

Here’s a link to Paramount Equity’s disclosure page showing the really low LTV required to get the rate advertised.

Here’s the story that posted today in the Puget Sound Buz Journal about Wa State’s troubled banks.

Here’s the follow up from today’s class…

Here’s CR’s Graph Gallery. The menu runs left to right across the top of the page, just under CR’s logo.

Home ownership rate has fallen to 66.1% according to the US Census Bureau.

Here’s the WA State Foreclosure Fairness Act and here’s the new WA State Foreclosure Resource Guide This is a VERY GOOD PDF for distressed homeowners.

Do you want to give the CFPB input on the new GFE/TIL? Here’s your chance.

Here’s a link to the WA State Bar Association where financially struggling homeowners can apply for free legal aid.

Here’s Rhonda Porter’s twitter account, which provides a great example of how to follow the new WA State DFI advertising rules.

Here’s the story about the indictment of Shawn Portmann…and the Seattle PI story Tom referenced.

Here’s an article I wrote asking the question: “Are those Cash Call radio ads deceptive?”

and another recent article asking the question: Should All Short Sale Negotiators be Banned?

Here’s the FTC ruling on MARS (mortgage assistance relief service provider rules)…these would be the loan mod guys.

Here’s more reading material on short sale fraud…Here’s the 2011 Core Logic report.

Out of the 5661 licensed LOs in WA State, only 2967 are located here.  The rest are out of state.

Here’s a story about builder “ghost towns” where builders used the downpayment assistance programs at the very end of the bubble to get rid of inventory using straw buyers….lots of foreclosures.

Here’s Bill Black’s article on Bank of America.

Here’s the WA State Foreclosure Fairness Act and here’s the new WA State Foreclosure Resource Guide This is a VERY GOOD PDF for distressed homeowners.

Here’s our new federal regulator: The Consumer Finance Protection Bureau.,.,..and their request for help and feedback on designing a new TIL and GFE.….and here’s the CFPB Consumer Access website

Here’s Rhonda Porter’s twitter account, which provides a great example of how to follow the new WA State DFI advertising rules.

Here’s the story about the indictment of Shawn Portmann…and the Seattle PI story Tom referenced.

Here’s an article I wrote asking the question: “Are those Cash Call radio ads deceptive?”

and another recent article asking the question: Should All Short Sale Negotiators be Banned?

Here’s more reading material on short sale fraud…Here’s the 2011 Core Logic report.

Here’s a link to the  delinquency graphs I showed at the beginning of class.  Follow the menu at the top of the web site and tab over to ‘delinquencies.’

Here’s Jon Stewart interviewing Elizabeth Warren.

Here’s the Ben Bernanke comments from today’s Econ Outlook.

Here’s Bill Black’s article on Bank of America.

And thanks to Donna Blaylock from Firstam Title and Escrow!

Here’s the firstam demo website.

Thanks so much to Wayne North from the Seattle HUD OIG office for talking w/us about mortgage fraud. Wayne mentioned a case in Bakersfield Calif. Here’s an article about the Crisp mortgage fraud case.

Here’s our new federal regulator: The Consumer Finance Protection Bureau.,.,..and their request for help and feedback on designing a new TIL and GFE.….and here’s the CFPB Consumer Access website

Here’s Rhonda Porter’s twitter account, which provides a great example of how to follow the new WA State DFI advertising rules.

Here’s the story about the indictment of Shawn Portmann that was mentioned by Wayne North from HUD.

Free, HUD-Approved Non-Profit Agencies can be found here for WA State homeowners.

Here’s an article I wrote asking the question: “Are those Cash Call radio ads deceptive?”

I sent an email to Deb Bortner at DFI asking about the Paramount Equity Consent Order:  Q: What is the money used for that DFI collected as a fine from PE?

There was a request for more reading material on short sale fraud…Here’s the 2011 Core Logic report.

there was a request for the delinquency graphs I showed after the Faye v. Santos case.  Follow the menu at the top of the web site and tab over to ‘delinquencies.’

Here are the follow up stories/links from today’s class.

Here’s our new federal regulator: The Consumer Finance Protection Bureau.,.,..and their request for help and feedback on designing a new TIL and GFE.

Here’s Rhonda Porter’s twitter account, which provides a great example of how to follow the new DFI advertising rules.

Here’s the story about the indictment of Shawn Portmann.

I briefly mentioned the “doubling up” of people in the housing sector during a recession.

We talked about the surge of Bank of America foreclosures headed our way…

there was a request for the delinquency graphs I showed after the Faye v. Santos case.  Follow the menu at the top of the web site and tab over to ‘delinquencies.’

I promised Bill Black’s excellent article about taking Bank of America into receivership.

Here’s an article asking the question: “Are those Cash Call radio ads deceptive?”

Professor/Doctor Robert Shiller wrote a book in 2008 that contained an idea about a mortgage that would automatically adjust to the borrower’s income.  The name of that book is “The Subprime Solution.”

Thanks for a fun class today everyone!
You made my day enjoyable
Jillayne

Nat’l Assoc of Mortgage Fiduciaries writes a brand new course every year for CE. The SAFE Mortgage Licensing Act prohibits LOs from taking the same class over and over again. However, you CAN choose to take your CE course from the same course provider year after year, as long as the course is a different course from the one taken the previous year.

In 2010 many LOs took the pre-licensing/exam prep course.  NAMF’s CE course is all new, completely different material.  In 2010 some LOs who were previously licensed only had to pass the new, national LO exam and took no CE class in 2010.  So 2011 will be the first time you’re taking CE since the passage of The SAFE Mortgage Licensing Act.

More about our CE course
-
Schedule of upcoming classes

Here are links to some of the things we talked about in class…

During the segment on mortgage fraud, we mentioned two local cases. Read more about Shawn Portmann here and here’s a link to the news story on West Sound Bank.

Here’s a recent blog post on those awful Cash Call radio ads

We talked a bit about the CSBS and the AAMR. Here’s the announcement regarding their published guidelines on non-traditional loans.

Here’s a fantastic interview between Jon Stewart and Elizabeth Warren, who came up with the idea for the new Consumer Financial Protection Bureau. The CFPB is now the main regulator that oversees the federal laws we covered in class today.

…and here I am being interviewed by the NYTimes regarding the CFPB.

Here’s HUD’s FAQ booklet on RESPA. If I were a test writer, this would be a fantastic source for possible test questions.

There was a request to take a look at the new proposed GFE/TIL forms from the CFPB.

Thanks for an enjoyable class today. Here’s the follow up from class:

Here’s a summary of the Dodd Frank Wall St Reform Act.

There was a request for information regarding CEO compensation limits under Dodd Frank.

For those who need to brush up on their Shawn Portmann background before he goes down, here’s the salacious Seattle Weekly expose.

Q: How does the WA State Foreclosure Fairness Act apply if the homeowner has a second mortgage?

A: I don’t find any clear language in the statute so I emailed local attorney Christopher Benson, who wrote a nice summary of the FFA.

Oh boy! Here are the new proposed GFE/TIL forms from the CFPB.

Maybe I’ll use this consent order for next year’s WA State Law case study on “how not to run a mortgage company.”

The acronym APOR stands for “Average Prime Offer Rate”

We just had two interesting RESPA cases break this week. One was Fidelity, the other was Prospect Mortgage, both firms are doing business in WA.

and I found that Core Logic report on Short Sale Fraud.

Here’s the follow up from some of the questions and discussions from class today.

Here’s a recent blog post on those Cash Call radio ad
Interesting that Cash Call is in trouble with the AG’s office in California. Read more here.

I mentioned these movies during the course of both days:

There Will Be Blood
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Charlie Wilson’s War
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The Kite Runner
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An Education
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Red Dragon

DAY 2

Here’s a fantastic interview between Jon Stewart and Elizabeth Warren, the head of the new CFPB.

We talked a bit about the CSBS and the AAMR. Here’s the announcement regarding their published guidelines on non-traditional loans.

Here’s HUD’s FAQ booklet on RESPA. If I were a test writer, this would be a fantastic source for possible test questions.

And then we have the story about Fidelity Title paying a 4.5 million dollar RESPA fine to HUD yesterday.

Here’s the story about the ECOA violations at Cornerstone Home Lending….this story mentions the mortgage insurance cmpany involved.  Here’s the HUD Memo on the Fair Housing violation.

Radio listeners: There’s nothing inherently wrong with mortgage companies that advertise on the radio. This is one business model of many but realize that radio ads are not inexepensive and there are a few ways that a mortgage company can pay for their advertising. One way is to charge you higher interest rates.  But wait, how could they do that when they’re advertising low, low mortgage rates? 

The answer is one you will not want to hear but I’m going to tell you anways:  The rates advertised are likely NOT the rate that you will get.  The rate advertised is for a loan program that only a very small percentage of people will qualify for.  People with credit scores above 740. People with lots of equity in their homes, people who want a 10 year mortgage, or in the case of Cash Call, people who ONLY live in the state of California.  That’s right, the radio ad that’s running in Seattle comes with one caveat: It’s only avail for California borrowers.

To their defense, the Cash Call radio ad airing on 97.3FM does state that the rate and APR advertised are for a 10 year mortgage but realize that only a very small percentage of people calling that firm will end up with a 10 year mortgage.  This might come very, very close to a classic bait-and-switch scheme without crossing over the line but we don’t have enough facts to make that determination.  Instead the reason for their radio ad is to motivate radio listeners to pick up the phone and call. 

So, who’s on the other end of the phone?  The answer shows us another way companies that advertise on the radio make money. 

Any consumer who is curious about the licensing status of their loan originator can use the Nationwide Mortgage Licensing System’s Consumer Access website to check on the status of a mortgage company or individual loan originator.  When searching for the company name CashCall you’ll see many, many licensed LOs, okay that’s good. But dig a little deeper and you’ll notice that each person’s employment history contains many months of unemployment right around the subprime meltdown and lots of jobs held at subprime shops or other companies that only do radio or TV ads…Ditech, Amerisave, Countrywide, and other low wage side jobs outside of the mortgage industry.  That leads to the second part of how these companies make money advertising on the radio.

If they can’t offer you the lowest rates they’re advertising, then another way to make money is for the radio-advertising mortgage company to pay their loan originators a really low fee.  This is justified by the firm because…the company is making the phone ring! All the LO has to do is sit there, answer the phone and close the customer.  This is loan origination at its worst and if you don’t believe me just simply google:  Cash Call Complaints or Quicken Loans Complaints and see how many dis-satisfied customers they’ve left in their wake.

Homebuyers and refinancing homeowners should be wary of ANY mortgage lender that operates out of state and has no physical prescence in your state and if they did have an office here, why aren’t you working with a local person? 

Homebuyers and refinancing homeowners should always check the licensing status of their loan originator here and if their LO is not in the NMLS system ask WHY and ask to speak with their manager. Mortgage brokers and non-depository mortgage lenders must license their LOs. Depository bank LOs begin registering their LOs within the NMLS system this year. Maybe the person on the phone calls himself/herself an intake specialist or a loan something or other. Ask to speak with a licensed LO. If there are no licensed LOs then you’re probably dealing with a lead generation company and I’ll do a serious smackdown on lead gen firms in another blog post.

Companies like Cash Call and Quicken hire the loan originators who have no client base, don’t want to work hard enough to earn repeat business, only work part time, will work for a low wage, and/or are paid to close deals and not serve the best interests of their clients.  Do you want low rates? Go ahead and use one of these companies but you should have extremely low expectations of your rate being as verbally promised or the transaction closing at all. Expect pain and suffering. Some people pay extra for that, but now we’re getting off track.

Do you want your transaction to close? Select a loan originator based on his or her experience and knowledge. Choose a local company with a loan originator located right in your city so you can go into the office and meet with him or her face to face at application.  Yes, this will take time. Do you want your transaction to close and also get a fair interest rate? Then that means you will have to invest some time into understanding your options and understanding the documents you’re signing and that means human interaction whether that’s email, text or facebook messages.  You will need someone to respond to your questions who knows what they’re doing.  It is impossible to be a part time loan originator and serve your clients efficiently because there are far too many changes taking place on a daily basis.  A part time salesperson’s time and energy are split between many competing interests and self interest will typically win out every time. 

Kiel Mortgage radio ads are great. The radio ads from TILA Mortgage have improved over the years.  Best Mortgage’s ads are fine.  These are all LOCAL Seattle area companies with local loan originators and company owners who have been serving homebuyers and homeowners for decades.

I notice that on the Cash Call website, and on KIRO 97.3 FM, they’re advertising a “no cost” mortgage loan.  Folks, there is no such thing as a zero cost loan.  It doesn’t exist unless you’re doing a straight interest rate reduction refinance with your same lender, going through that lender’s loan servicing department and I think it’s even rare that that would happen nowadays with so many banks and lenders immediately selling everything to Fannie Mae or Freddie Mac.  Mortgage loans will always have fees and costs involved.  Some of those fees will be to the bank funding the loan, other fees will benefit the loan originator helping you, and still more fees will go to third parties.  Any company that tries to sell you a “no fee” mortgage loan is lying to you. The fees ARE being charged….they’re just being covered by a higher rate or they’re not telling you about the other third party fees that you’ll pay at closing unless you decide to read the fine print. 

So the opening call-to-action phrase on the Cash Call home page is a lie, the radio ads are deceptive and their loan originators are sub-par. I’m sure they’ll make several million dollars this year, pay a very small percentage of their profits in fines, and keep on using the radio to find more rate shoppers.  It’s a business model that works. Expect more copycats.

Here are some links that we discussed in class today.

We talked about the brand new WA State Foreclosure Fairness Act….and here’s a great blog post from Jess and Julie Lyda on this topic.

Here are some recent statistics from Seattle Bubble on Notice of Trustee Sales, Trustee Deeds, and Warranty Deeds for the Tri-County area. By the way, Tim Ellis offers these stats in report format here.

Here is the NMLS consumer access website.

Here’s the press release on the Golden Empire Mortgage settlement.

Here’s a link to the DFI naughty list.

At the beginning of class someone mentioned the movie “Too Big to Fail.”