Hawaii Randy's Real Estate Opinions: We Need More Control Over Licensing of Loan Officers

We Need More Control Over Licensing of Loan Officers

As a real estate agent, I have spent a lot of time and money to ensure that I have the best training and knowledge.  The state required me to take as tough exam and get continuing education.  I carry E&O insurance and subscribe to an ethics code.

It is not a perfect system, but it has improved with time.     

Loan officers on the other hand are not held to a set of standards.         Money House

 

Don't get me wrong, I work with some of the finest people you could ever want to do business with and proudly recommend their services to friends and clients.  Unfortunately fro the public and the real professionals, anyone off the street can become a loan officer for the price of a license.

 

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Randy L. Prothero, REALTOR®

Broker-in-Charge, ABR, AHWD, CRB, CRS, e-PRO, GRI, MRP, SFR

eXp Realty

Team Leader - "The Prothero Group"

Randy Prothero is well established as an expert in working with military / VA clients and first time home buyers.  His home seller's (listing) campaign is one of the most aggressive marketing programs in the area.  His luxury home listings sell faster and for more money.

Based out of Mililani, Hawaii. Randy services the island of Oahu (Honolulu County) Performs mediations and ombudsman services for the Board of Realtors.  To improve overall professionalism in his area Randy also offers classes for real estate agents. 

www.HawaiiRandy.comOahu (Honolulu County) Property Search  Hawaii Military Relocations

Comment balloon 23 commentsRandy Prothero • November 12 2006 03:51PM

Comments

Perhaps they need an association like the NAR, it could be the National Association of Loan Officers (NALO). As members, they could be called...umm.....loantors? Mortgagetors? But like realtors, they could subscribe to a higher level of ethics, be required to take classes, etc. -Charles
Posted by Jacqulyn Richey, Las Vegas Real Estate (Prominent Realty Group) over 11 years ago

They need something. 

I feel it is like the wild west when dealing with some of these loan officers.

Posted by Randy Prothero, Hawaii REALTOR, (808) 384-5645 (eXp Realty) over 11 years ago

Some states do make loan officers license.  Most do not.  If you work for a bank, the bank has a code of ethics and certain criteria that they make all their employees abide to.  Most banks make their loan officers and other workers take certain tests about bank procedures.  It has to be done, it's part of the "truth in lending" regulations. 

I use to be a loan officer.  I worked very hard for more clients.  Realtors had a habit of sticking their nose into things they were not fully trained to know.  Structuring a loan, why certain things are done and why.  The loan officer is the one that sees whats on the credit report.  It's the loan officer that knows what the underwriters are going to accept or not accept.  Most L/O's do do some type of continuing education.  No it's not mandatory but most do so they can stay up on things.  Even though I'm a realtor now, it still irritates the daylights out of me that some realtors think they are so much better than a loan officer!

Posted by Cynthia Sloop (Community Association Manager) over 11 years ago

Cynthia,

I agree with everything you said.  Realtors work with good professional loan officers as much as possible.  We know who makes the deals possible. 

I try to keep my nose out of the loan as much as possible.  I use top notch people and trust them fully.  When a client uses a loan officer who is obviously not doing a good job.  I am now in a tough spot.

The one we dread is the buyer on the other side who's loan officer costs us the deal because he does not preform or just makes it a painful process.

We in the business know who the good loan officers are.  unfortunately the general public doesn't always have that going for them.

Posted by Randy Prothero, Hawaii REALTOR, (808) 384-5645 (eXp Realty) over 11 years ago

Hi Randy,

I agree with you. It is blatent when I see a loan officer misuse terminology and terms for loan products on the market like an Option Arm or Neg Am loan, not explaining ALL OF THE DETAILS to their clients and doing them an injustice.

Scott

Posted by Scott Gormley (Oak Valley Mortgage-California Home Loans and Refinancing) over 11 years ago
Randy I agree with you a 100%. This is usually the problem with problematic deals is the mortgage broker has no idea what they are doing
Posted by Bob Pavey, CRS (RE/MAX Hometown) over 11 years ago

I used to recommend to buyers that they use a quality mortgage lender and not use Bob's Mortgage Service.  I didn't realize there was a Bob.

A buyer who was referred to me by a well known leader in our community was also referred to Bob a mortgage broker.  I gave the buyer the don't use Bob's mortgage speech only to find he was actually using Bob.

We found him a great home.  Bob was wonderful to work and he took good care of the buyer.

 The buyer to this day needles me about that.

Posted by Randy Prothero, Hawaii REALTOR, (808) 384-5645 (eXp Realty) over 11 years ago

With respect to both Randy and Cynthia, It is my opinion that you are incorrect.

There are a few ways loan officers are regulated.  Over 20 states require individual licensing of loan officers and 48 of them require brokers to be licensed.  

We believe (Mortgage Bankers Association) that a greater responsibility is placed on the actual licensee (ie...broker or responsible individual).  What does that mean to you? 

If you think you're dealing with a cowboy (and they ARE out there)...call his licensed, employing broker.  A mortgage broker license is harder to get than a Real estate broker's license in most states (must prove financial responsibility for mortgage broker license).  The licensees do NOT want cowboys working for them and WILL respect your opinion. 

I understand your frustration but encourage you to try this.  You'll find that our system really does work.

PS_(In California we have TONS of people posing as Realtors who are actually unilicensed, illegitimate marketing assistants.  They are complete cowboys.  When we call the broker, they are dealt with immediately) 

Posted by Brian Brady, 858-777-9751 (San Diego VA Home Loans/858-777-9751) over 11 years ago

You may find that to be the case in California. 

In Hawaii there are no education requirements of any kind to get a mortgage license.  Just pay the fee.

Posted by Randy Prothero, Hawaii REALTOR, (808) 384-5645 (eXp Realty) over 11 years ago

Then I'm moving to Hawaii.

Just kidding. The California and Arizona regulators ARE a pain in the butt, though.

Does the mortgage broker (in HI) have a financial responsibility?  i.e. post a bond, responsible for employees? 

Posted by Brian Brady, 858-777-9751 (San Diego VA Home Loans/858-777-9751) over 11 years ago
The biggest problem I have with the Vast Majority of loan officers is they are SLOPPY.  They do not maintain an awareness of where a deal is, nor do they push others to meet deadlines.  I for one have a hard time understanding the general slack attitude since a great deal of thier income is based on the transaction closing.  I guess it is the "god syndrome"... You know they feel like no one will go to someone else becuase they know all their is and they have convenced the buyer of such.  the only problem with that attitude is when I am aware of a loan officer who practices in that manner.  I track the deal daily, advise the buyer or seller and or other agent or all of the above.  In other words I play the gad fly and inform the player of the problem who then goes back to the L/O.  It doesn't take to much of this to make the person seeking the loan realize they have made a mistake or to bring these Napolean types heal.
Posted by Michael Roberts (Real Estate Professionals of Glynn) over 11 years ago
I agree.... There are too many sharks in the pool giving us honest hard working LO's a bad name. Where do I sign up to get this assoc. off the ground.
Posted by Leo Namiot, CT Mortgage Lender - FHA, VA - Jumbo Mortgages (www.LeoLends.com: CT Low Rate Mortgages) over 11 years ago

What is eye popping for me is the statistic Brian pointed out: Over 20 states require individual licensing of loan officers and 48 of them require brokers to be licensed.  

Shouldn't all Loan Officers be licensed?!? 

While I'm not sure what affect it would have on the industry, I think requiring both the Broker and the subordinate Loan Officer to be licensed is a good start.

Posted by PFE Administrator (Pre Foreclosure Experts) over 11 years ago

Let me start off by saying that I am licensed as a loan originator. However, I think that by only requiring employing brokers to have a license allows for more supervision.  If the responsibility for the loan transaction fell ONLY on the resposible individual (instead of the originator) you would have tightened rules.

Utah mortgage brokers loved it when originators were individually licensed.  It allowed them to hire more of them. offer ridiculously high commission splits and wash their hands of responsibility .

In California, we have two licensing entities.  The Dept of Real Estate licenses individual originators as salespeople.  The Dept of Corps licenses the companies.  Guess who has fewer complaints?  You got it!  The DOC regulated brokers/lenders.  The rules are much more stringent and the background checks are more comprehensive.  (Leave it to private industry to outperform the gov't again)

It sounds almost illogical but in this case, non-licensing of individaul loan officers provides for a safer marketplace for the consumer. 

Posted by Brian Brady, 858-777-9751 (San Diego VA Home Loans/858-777-9751) over 11 years ago

If I were a good loan officer I would be pushing for more regulation and accountability in the industry.

As a Realtor I have actually lobbied the legislature for stronger laws for our industry.  The higher the standard the less likely we will be on the other side of a nighmare.

Posted by Randy Prothero, Hawaii REALTOR, (808) 384-5645 (eXp Realty) over 11 years ago
My thought is that, by requiring both the employing Broker and Loan Officer to put their respective licenses on the line for each transaction, more responsibility would result.  Both individuals have a vested interest in insuring the transaction is in line with the law.  Plus, it would incentivize Loan Officers to be more careful as losing one's license would prevent them from working in the industry. 
Posted by PFE Administrator (Pre Foreclosure Experts) over 11 years ago

Adam, I couldn't say it any better.

There are so many mortgage brokers who paid $350 and got a license.  They have nothing to lose and know not much more about the business.

We as professionals has spent a lot of time and money to learn our trade.  It would be some much more pleasant out there if we could wave a magic wand and get the rest of the folks out there to do the same

 

Posted by Randy Prothero, Hawaii REALTOR, (808) 384-5645 (eXp Realty) over 11 years ago

Hey!  I just had some thoughts I wanted to share:

1- I'm all for individual loan officer licensing along the lines of a NASD license; national, strict testing, and sponsorship by a company.  It is a great barrier to entry for the mortgage business and I'm all about eliminating the competition.  Can I pass the test and background check?  Piece of cake. 

2- Should you want this as a Realtor?  Your customer will have less choices and the cost to originate a loan will rise (there will be less people to originate loans).  Maybe that's okay.  In reality, the higher upfront cost of origination may be a long-term savings by the customer because they will get the right advice.

The current state-issued originator licenses have no use, though.  States don't enforce the laws and brokers don't want to report a bad LO (because they are ultimately responsible) . The NASD model would work. 

This was a really good post, Randy 

Posted by Brian Brady, 858-777-9751 (San Diego VA Home Loans/858-777-9751) over 11 years ago

Adam:

You would think that is true but it actually lets the broker off of the hook.  I'll give you an example:  fraud.

The regulators have a difficult time punishing the broker when fraud happens.  They say that you didn't supervise properly, the broker says, supervise what?  You guys (the licensing entity) taught this guy that fraud was wrong in his first class!  You also taught him that his license would be ripped if he commits fraud.  The broker would say..."I had a reasonable expectation to assume that a licensee would never commit fraud"  In California, and Utah, he'd be correct.

This is all academic talk, though.  I agree with the general direction of the article 

Posted by Brian Brady, 858-777-9751 (San Diego VA Home Loans/858-777-9751) over 11 years ago

I disagree that licensing with education requirements would eliminate competition.  It would only eliminate those not serious or those who need to be doing something else.

Look at the Realtor model:

In Hawaii we have more licensees today despite tougher requirements to get and keep a license.  Yes if you commit fraud you are the one going to jail.  All agents work under a broker who has to review and sign off on all contracts.  The brokerage also takes hits on E&O insurance and may also receive sanctions from the real estate commission or the Board of Realtors if they were found at fault when a bad agent injures someone.

Do we have real estate agents that shouldn't be in the business? Absolutely

Can we do something about it? Absolutely

Why would we care?  They make us all look bad, they make our jobs harder, they put our clients at risk and they drive up the cost of doing business for all of us.

Posted by Randy Prothero, Hawaii REALTOR, (808) 384-5645 (eXp Realty) over 11 years ago

Well, I had a three paragraph response but it just hit me.   We're not going to agree on this small, academic point.  I think we both want the same thing and that is higher standards.  If licensing of loan officers is the preferred solution, who am I to complain?

Now, do I get to set the standards?  If I do they will be VERY high! 

Posted by Brian Brady, 858-777-9751 (San Diego VA Home Loans/858-777-9751) over 11 years ago
Agree, you never know what your getting in to with a new L.O.  That's for sure!
Posted by Michael DeMello, CRS, ABR, CDPE, e-Certified (Prudential Locations LLC) over 11 years ago

Brian,  I know we both agree in general.

Those of us who consider themselves professionals will do what they need to do to get needed training on their own.  The others are who we are discussing.

Posted by Randy Prothero, Hawaii REALTOR, (808) 384-5645 (eXp Realty) over 11 years ago

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