Loan Officers Need an Education

By
Managing Real Estate Broker with eXp Realty RB-19250

We all know that the lending industry is going through major changes.  The Federal government has stepped up and determined that states either have minimum licensing laws or create them for mortgage brokers.  If they don't, the Feds will step in for them.   This is known as the SAFE Mortgage License ACT.

The SAFE Act does several things as far as tightening up mortgage brokers and their interaction with the public.  In Hawaii this badly needed proposed licensing requirement for mortgage brokers includes education, testing and continuing education.  These requirements are already in place for real estate and insurance agents.  It looks like a step in the right direction.

Here is where the net still has a hole.  The SAFE ACT creates a series of stuff for employees of banks and credit unions.  It also exempts them from the state licensing requirements.

This is the part of my post that will anger a few loan officers at the banks and credit unions.  I completely disagree with exempting them for state licensing requirements period!  State licensing requirements could do a couple of things that the SAFE Act won't.

  1. There is pre-licensing course and pre-license test.
  2. All loan originators would be regulated by one state entity, giving the public a clear course of action when they have been harmed.
  3. Continuing education requirements
  4. A closing of the loophole that would prevent a mortgage broker who has a revoked state license form taking a job at an exempt bank or credit union and doing it again.

In the course of selling real estate I have dealt with more loan officers than I can count.  Most of the ugly situations I have seen came from the mortgage broker side of the industry, but not all of them.  Several have come from out of state banks, one from a local credit union and two of the very worst came from local bank employees.  In one case the loan officer had a license revoked by the State of Hawaii a few years back.  That loan officer was at that time employed by the second major bank since losing their license.  In that case it took me meeting with two vice presidents of the bank to resolve the problem.  In the end my client was still out time and money.  The loan officer was no longer with that bank and off looking for the another place to prey on the public.

No matter how you shake it, no one should be allowed to originate a loan unless they can demonstrate a basic knowledge of the business and laws.  There should also be a simple consistent way for consumers to file complaints anyone who originates a mortgage.  I know that many bank employees are getting ready to tell me how they are federally regulated.  Big deal!  How does that help the consumer who is trying to buy a home and is being taken advantage of?  File a federal complaint?  Get real!

If you are looking to buy or refinance a home in Hawaii, feel free to contact me.  I can give you the names of several professional, honorable loan officers that will give you VIP treatment.

Posted by

 

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Randy L. Prothero, REALTOR®

Principal Broker, ABR, AHWD, CRS, e-PRO, GRI, MRP, SFR

Island Style Realty Inc.

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.

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

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Re-Blogged 2 times:

Re-Blogged By Re-Blogged At
  1. Lenn Harley 02/16/2010 10:26 PM
  2. Erica Ramus 02/17/2010 06:02 AM
Topic:
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Rainer
57,968
Mark Aalto
Summit Funding Inc - Portland, OR
NMLS: 116708

The continuing education is more of a barrier than anything in my opinion.   It will weed out more people either from the standpoint of cost and/or time, intelligence, experience etc.  It's not a bad thing. 

As Wayne mentions above, there are plenty of ethics and RESPA violations on both sides of our industries being committed even today.  RESPA laws forbid kickbacks and yet they are rampant in the industry.  I have also had quite a few similar experiences to what Wayne mentions with agents asking for kickbacks, money to pay for advertising etc.  RESPA isn't enforced currently.  Some people are aware of the laws, some are ignorant - education requirements help those that are ignorant but not those that choose to circumvent ethics.  I think this is an important thing for everyone to consider. 

Previous versions of RESPA and TILA were sufficient.  The problem is that they weren't enforced.  The same thing applies to what Wayne mentioned in post #36.  Enforcement is always going to be "flavor of the day" - whatever is sexy or trendy is what is going to get the headlines.  Right now it's trendy to blame everything on the Loan Officer which again, is a complete oversimplification of a very complex problem.

Education and licensing are not a bad idea; however, were they in place, the things that led up to the meltdown still would have happened. 

As per comment #42, both of our industries will thin out.  We will see a lot of Realtors exiting the industry as well.  There are too many of all of us currently.  The up side is that our market share does increase but it's not a very fun way for it to do so.

Feb 18, 2010 03:32 AM #43
Rainmaker
67,870
Denise Allen
Resh Realty Group - Chesapeake, VA
Realtor@ Chesapeake, Hampton Roads

I agree that their should not be any exemptions.  It would make everyones life easier if everyone was on the same page.

I have talked to a Mortgage Broker recently that did not have any idea how to do a first time buyer loan.  Everyone shoould be required to have training not only in the federal guidelines but the state level loans and guidlines.

Feb 18, 2010 04:54 AM #44
Ambassador
2,070,043
Barbara-Jo Roberts Berberi, MA, PSA, TRC - Greater Clearwater Florida Residential Real Estate Professional
Charles Rutenberg Realty - Clearwater, FL
Palm Harbor, Dunedin, Clearwater, Safety Harbor

It is important for all of us, realtors, loan officers, home inspectors, etc to keep up with our continuing education - some unfortunately don't do that..........

Feb 20, 2010 06:46 AM #45
Rainmaker
651,433
Randy Prothero
eXp Realty - Mililani, HI
Hawaii REALTOR, (808) 384-5645

Lenn - $5 if you go to Starbucks.

Jay - There seems to be a big hole in Florida.

Tere - I see the NAR sent a letter to the HUD about seller financing.  I have mixed feelings on that one.  Seller financing has been used as a tool for the scammers.

Morgan - CE is a start for sure.

Rodney - That was not the case in a couple of the loan officers I ran into.

John - Just remember that a broker still has to take the loan to a bank.   The bank is the one we the tax payers are insuring.

Joe - States should always have the right to make stricter standards than the Feds.

Feb 21, 2010 07:12 AM #46
Rainmaker
651,433
Randy Prothero
eXp Realty - Mililani, HI
Hawaii REALTOR, (808) 384-5645

Kyle - The banks have a stronger lobby.  In the past they fought toughening the licensing for brokers also.  They are now throwing the brokers under the bus.

Jeff B. - The one thing a state license would do is allow the consumer to have a local source to file a complaint and to get resolution to a problem.  Also it would give the state the ability to get them off the street.  The education part will make a difference.  We have so many loan officers here that can't even spell FHA.

Michael B. - It happens all the time!  The one guy I mentioned his license revoked from the state.  That takes a lot under the current laws.  Two banks hired him after that.

Jenna D. - I couldn't agree more.

Ken C. - FDIC does nothing for the individual consumer who is in a transaction.  You are right on the money.

Robin R. - Thank you

Feb 21, 2010 07:29 AM #47
Rainmaker
651,433
Randy Prothero
eXp Realty - Mililani, HI
Hawaii REALTOR, (808) 384-5645

Rick - You make a point.

Chuck - Ditto!

Paul M. - The license requirements for real estate agents has gotten tougher and is getting tougher.  The folks handling the money are exempt.  That does not make any sense.

Russ - I agree with almost everything you said.  It is much, much lower than 20% who do any real volume.

Mark A. - I can't argue with anything you said.

Aaron - You are right.

Erica- Thank you for spreading the word.

William F. - My wife works for an insurance company.  She had to take 7 extremely tough license exams and acquire 7 licenses.  That was to be a secretary.  A loan officer at the bank does not have any requirements.

Neal B. - Practicing without a license.  That should be the title of my next article on this subject.

Neal B. - To cut hair you need more education than any of the disciplines in real estate.

Ed G. - The ones I work with all have license, even though they are not required to have one.  Many do not.

Feb 21, 2010 07:43 AM #48
Rainmaker
651,433
Randy Prothero
eXp Realty - Mililani, HI
Hawaii REALTOR, (808) 384-5645

Mariah - You are correct, most of our bad loans came from out of state lenders and not the local banks.

Lorraine and Lorretta - That only covers brokers, but it is a good start.

Bob B. - That lack of professionalism is a problem in many industries.  Our is an extreme problem because of the level of harm being created.

Marc I. - More education would be a great start.

Tom B. - I have received several bad loan approval letters from banks.  I have seen bait and switch loans from banks and I have seen credit union require borrowers to loan docs without seeing a HUD-1.  I was banks who funded the toxic loans around the country.  I do recommend that my clients use banks and not brokers, but even then it can still be the wild west when a consumer shops for a loan.

I have written many articles criticizing mortgage brokers and bad real estate agents also.  I am an equal opportunity criticizer when it comes to rpote4cting the public.

Wayne B. - You sound a bit angry.

Wayne P. -You are right, they shouldn't.

Christine D. - The license would require they get training first and then the state could regulate their activities.

Feb 21, 2010 07:59 AM #49
Rainmaker
651,433
Randy Prothero
eXp Realty - Mililani, HI
Hawaii REALTOR, (808) 384-5645

Regina B. - Bad for them, I am not sure if that is bad for the consumers.  Many should not have been in the business to start with.

Mark A. - Many of those who are leaving the industry were not doing any transactions or only 1 or 2 a year.  They are the most dangerous, as they are not proficient and should not be allowed to prey on an unsuspecting consumer.  It is not a bad thing to collect those licenses.  In the lending industry, here in Hawaii there was no way to get those dead licenses off the streets.

Denise A. - That is a big problem with out of state lenders.  They have no knowledge of local laws or customs and don't care.

Barbara Jo - CE would at least get them to learn of the new law changes.

Feb 21, 2010 08:06 AM #50
Rainmaker
255,846
Wayne L. Brown
Broadview Mortgage - Alpine, CA

Randy

Yes, I am angry.  Certainly not at you, but the corrupt politicians who have almost bankrupted me with all this financial mess that started in August 08....the same month that I finished incorporation of two new companies.

With credit lines immediately shut off by all banks, knee jerk reactions by banks and Regulators, it has almost put me out of business,

I had a life time dream crushed as politicians made my industry a " Scap-Goat " when Banks do not have to comply with the same National Licensing Requirements that I do, plus the New GFE which Banks and Mortgage Bankers do not have to disclose the same income that I do to clients.

Again, I mean no disrespect, but if you had to go through the hoops many like me do, it would drive you crazy as we are singly being blamed for this mess.  HVCC is a shame with banks owning the AMC companies ordering appraisal with costs increasing 25% plus to borrowers............I could go on for hours, so Yes I am angry at our politicians Dems or Repubs for this mess.

Best Regards, and thanks for your response.

Mar 09, 2010 03:18 PM #52
Rainmaker
651,433
Randy Prothero
eXp Realty - Mililani, HI
Hawaii REALTOR, (808) 384-5645

Wayne - You make some good points.  Bank and bank employees should be treated the same as brokers with how they deal with the public.

Mar 20, 2010 02:52 PM #53
Anonymous
J Hansen

I am looking into the continuing education of the 20 hours for the SAFE act in California.  I am seeing the cost of $399-499.00. 

Has anyone found it for less money?  I am trying to get the best deal, just like my customers!  Shoot me an email.

http://www.bigredloans.com

Apr 06, 2010 11:28 AM #54
Anonymous
Rob

Bullshit!  I work with a bunch of kids who are making more than your average surgeon.  All you need is to take a bullshit course any one could do it what a joke.  This is why our economy is falling apart.  Loan officers should at the very least have a four year degree, if not more.  Government needs to step in and do it themselves.  No reason a high school student should be making 35+K a month.  Think about it!

Jul 22, 2010 09:56 AM #55
Rainer
57,968
Mark Aalto
Summit Funding Inc - Portland, OR
NMLS: 116708

Our economy isn't falling apart because of Loan Officers making money or not making money.  If you bought a car that was made by Chevy and the automakers went bankrupt was the bankruptcy of the automaker the fault of the car salesperson?  Your comment doesn't make any sense.

Consumers, regulators, politicians, average citizens etc - everyone played a part in what has happened.  To state that what has happened in the economy is related to the education or lack of education of Loan Officers is an ill-conceived notion.  The idea that the government can step in and improve things isn't realistic.  They've already stepped in and written legislation, created new forms, etc. 

When the Government imposes laws and regulations they have to actually enforce them.  This is one of the biggest factors the contributed to what has happened.  Proper enforcement of RESPA, Reg Z etc hasn't ever truly been committed to.  Current regulations and policies will not prevent the next crisis unless they are actually enforced.  And, even so, there will still be consumers that make bad decisions and markets will rise and fall even with the most educated Borrowers and Loan Officers.  If a consumer doesn't have a job, it doesn't matter if their interest rate is 4.5% or 4.75% etc. 

Everyone needs to take responsbility for what has taken place.  The blame doesn't rest solely with Realtors or Loan Officers or Congress or Fannie Mae or Freddie Mac or FHA or Indy Mac or Washington Mutual etc.  To reduce a very complicated economic disaster to the education level of Loan Officers that took loan applications from consumers is to greatly simplify what really happened. 

Jul 22, 2010 10:11 AM #56
Rainmaker
651,433
Randy Prothero
eXp Realty - Mililani, HI
Hawaii REALTOR, (808) 384-5645

J. Hansen - Hawaii will have every two years, 10 hours of CE for loan officers starting next year for the first time and 20 hours for real estate agents from 10 this year.

Mark - The Federal government can't enforce things in every community, that is where the local regulatory agencies need to step up.  With state licensing, consumers have a local agency they can go to when ripped off.  Someone with a license will be required to have training.  Currently to be a loan officer in my state you need $35 and nothing else.  There are idiots running around with zero training or experience handling millions of dollars worth of complicated transactions and jamming up or ripping off unsuspecting consumers.

Jul 22, 2010 12:13 PM #57
Rainer
57,968
Mark Aalto
Summit Funding Inc - Portland, OR
NMLS: 116708

Randy-

My point is that regulations (State or Federal) don't mean anything without enforcement - whether that be the State or the Federal government that is responsible for overseeing the regulations.  As a company, we see violations constantly and the State and the Feds don't have sufficient resources to deal with the violations.  In Oregon we've had continuing education requirements for several years and it sounds like Hawaii is taking similar steps. 

I am not sure what constitues "jamming up" or "ripping off unsuspecting consumers" in Hawaii but only state licensed Loan Officers will be monitored by the State here in Oregon and soon there in Hawaii.  In other words, FDIC originators won't fall under their jurisdiction.  There are a lot of Loan Officers that take their trade seriously just like there are a lot of Realtors that do the same.  And, just as there are some really unscrupulous and unethical Realtors, there are unscrupulous and unethical Loan Officers as well.  There is a lot of money in our respective industries and not everyone will do things in the best interest of the consumer. 

In any case, I don't see education or regulation as a bad thing.  What I do think is that it's naive to believe that education in and of itself or regulation in and of itself will fix human nature itself.   

Jul 22, 2010 12:25 PM #58
Rainmaker
651,433
Randy Prothero
eXp Realty - Mililani, HI
Hawaii REALTOR, (808) 384-5645

Aloha Mark - I don't think that education the complete solution, but it is a great start.  The licensing requirements will remove about 70% of the people walking around with a license in their pocket who have had no training and are not in the business.

There was legislation introduced at our state to remove the exemptions for bank and credit union employees.  Hopefully it will get another shot next year.  But even those folks will have to be part of the national registry.  If the do something bad in one state they can't just jump to another. 

Jul 25, 2010 10:17 AM #60
Rainmaker
651,433
Randy Prothero
eXp Realty - Mililani, HI
Hawaii REALTOR, (808) 384-5645

Aloha Mark - I don't think that education the complete solution, but it is a great start.  The licensing requirements will remove about 70% of the people walking around with a license in their pocket who have had no training and are not in the business.

There was legislation introduced at our state to remove the exemptions for bank and credit union employees.  Hopefully it will get another shot next year.  But even those folks will have to be part of the national registry.  If the do something bad in one state they can't just jump to another. 

Jul 25, 2010 10:17 AM #61
Rainer
57,968
Mark Aalto
Summit Funding Inc - Portland, OR
NMLS: 116708

I agree Randy.  Continuing education and testing will to help to a certain extent.  There will be a basic knowledge level needed and that's a good thing.  And as you said, the bar will be raised a bit.  Statistically, something along the lines of 70% of those who take the test pass the test so I don't think it's quite as much of a barrier to entry as you'd like it to be.  Being from a State that has had continuing education required for the last 7 to 8 years I can tell you that it does help somewhat. 

Education is always a good thing.  But it won't keep people from breaking the law and I think that is all I'm trying to add to your post.  Without the proper enforcement of the rules and laws that we are teaching we only have 50% of what is needed. 

Thanks again for emphasizing the education piece.  It is a positive element to the whole mess we are in right now. 

Jul 26, 2010 05:19 AM #62
Rainmaker
651,433
Randy Prothero
eXp Realty - Mililani, HI
Hawaii REALTOR, (808) 384-5645

Mark - Just getting a few thousand people off the street that are not actually doing business is a great start here.

 

Jul 28, 2010 12:28 AM #63
Rainmaker
651,433
Randy Prothero
eXp Realty - Mililani, HI
Hawaii REALTOR, (808) 384-5645

Universities in USA - What you say is correct in many cases, but not in many others.  There are several national lenders who use inexperienced salaried employees and call them loan officers.  I have had several painful transactions over the years, where that was the case.

Jun 11, 2012 07:25 AM #64
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Randy Prothero

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