National Regulation of Loan Officers

I was a loan officer/broker for a little over 3 years in the mortgage business from 2004-2007 right in the thick of the subprime mortgage meltdown. I have been witness to all kinds of deception, some legal (albeit unethical) and some illegal. At the time I had no idea that the effects and consequences of what was going on in my chosen profession would be so far reaching.

I recently came across an article on the internet about the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 by Peter G. Miller. Basically the major to do about this act is the requirement of loan officers to be registered nationally and provide accountability. The more I read this article, the angrier I became.

One of the main points about this piece of legislation is that the FBI will fingerprint and do an extensive background check on anyone seeking licensure as a loan originator. Now, get ready for this one. Did you know that the FBI DOES NOT do background checks on US senators? That’s right folks, the same people that are enacting these laws, and are even given a secret clearance once elected, do not go through any type of law enforcement background check themselves. The FBI’s theory on this is that the election process is vigorous and any “dirt” on the potential candidate will be exposed by his or her opponent in the smearing process of campaigning. Doesn’t that make you feel safe to know that someone who has not been checked out is given the OK to look at secret documents of our government and military?

Apparently, the FBI says that “Well, its part of democracy, its part of what the American people want, they want to be able to vote for somebody to represent them in Washington and they don’t want us to get in the way of that and we have no predilection to get in the way of that.” as stated by Special Agent-in-Charge: C. Frank Figliuzzi of the Cleveland FBI. Now, I don’t know about you but that is certainly not what I want. Furthermore, I don’t think that doing a background check on some who is going to potentially hold a high position in our government is getting in the way of my decision making. In fact, I think it will help to decide who I want making the laws that will govern my life.

This mortgage law also assigns a national registration number to loan originators that follow them throughout their careers so that if they lose a license in one state they simply can’t move to another state to work there. According to James J. Saccacio, chief executive officer at RealtyTrac.com, the nation’s largest source of foreclose listings and data “Across the country we carefully license real estate brokers, lawyers and doctors. A system to register loan originators will not only create an important consumer protection, it will also have great value to lenders and mortgage investors.”

Let’s examine this piece by piece. The first group, real estate brokers, are mainly regulated by state laws. The only thing that real estate brokers do is find you a home, that’s it. Now we come to lawyers, who do not submit fingerprints or go through an FBI background check and again are primarily regulated by state laws. The last group consisting of doctors do have federal laws that regulate them and rightfully so, after all they are dealing in lives. However, as far as their licensure goes, again it is a state by state basis and not a national one.

Mr. Miller has shown his support of this law in this excerpt from his article “National Registration For Loan Officers Becomes Reality”: “The new loan officer system is different – and better – because each originator will have only one registration number. The loan officer system is also better for another reason: It can potentially lenders and investors to track the performance of individual loan officers. Imagine if Fannie Mae or Freddie Mac decided that they will only process mortgages which contain the loan officer’s unique identifier. It will then be possible to create performance scores and risk assessment measures similar to credit scores. If a lender sees that .5 percent of Smith’s loans are foreclosed that could result in a high score. If Jenkins has a 5 percent foreclosure rate then his performance score might be so low that his loans could not be sold on the secondary market and Jenkins would likely be forced out of the business.”

Correct me if I’m wrong, but what he is saying is that loan originators will be assigned something similar to a credit score based off of the payment habits of people he or she has done loans for? So, does that mean if you don’t make your payments on your car note the salesperson who sold it to you shold be held responsible and penalized? What about insurance or credit cards or cell phones or anything that you are sold and make payments on? Does that mean that all of those salespeople will be held accountable and penalized for nonpayment?

Mr. Miller goes on to say that “Tagging mortgages with permanent loan officer IDs would make loan originators directly responsible for the mortgages they produce. This hardly seems unfair given that loan officers are paid well for such work.” I can tell you that a loan officer who is good at wht he or she does can make a good bit of money however, the real people that are “paid well for such work” are the fat cats on Wall Street and the lending company themselves and it’s high level executives.

After reading this article I was curious as to what exactly where Mr. Miller’s credentials. My research discovered that a BA in Journalism and an MA in Public Relations and the writing of several real estate books along with numerous articles on the subject and the founding of his own website apparently make him an expert on the subject. I found no mention of him actually ever being a part of the mortgage industry in any capacity. With that in mind I suppose all I have to do is write a few books and some articles and start a website about open heart surgery and viola! I’m a subject matter expert.