OK, I am bracing for the backlash from that title.  Those who know me know that I am not a big government kind of guy.  To the contrary in almost every case I believe in less government; unfortunately not in this case.

There have been several great blog posts written the last couple of days on similar topics.  Rather than hijacking their posts I felt it better to write my own.

• CALIFORNIA SUBPRIME BORROWERS MAY GET RELIEF? - More Questions than Answers by Lenn Harley
• The subprime mantra, "Easy in.....easy out" by Broker Bryant Tutas
• What Part Do Individual Markets Need to Play In Our National Mortgage Crisis? By Carole Cohen
• Foreclosures in California Will Be Reduced! By Gene Reider

The mortgage industry has not stepped up to the plate and has done next to nothing to self-police.

In the past I have written on topics like licensing of loan officers and gotten more than a few on the lending side upset.  The funny thing is that almost without question everyone from the REALTOR® and the public side completely agreed with me.  What is wrong with the lending industry?  Is it just pure greed or something else?

When a group of top real estate agents get together all we seem to talk about is raising the standards of our profession. 

When loan officers join us all we speak about is which lender went out of business or what a mess the lending industry is in.

So why do the professional real estate agents want higher standards and the lenders want the Wild West?

Let me back up a bit.  Not all lenders and loan officers feel that way.  The professional loan officers I deal with on a daily basis feel the same way I do.  They would like the standards raised and the bums removed from the industry.

Let me share a few examples of things that have really gotten my dander up.

1. I deal with a lot of active duty military and VA eligible clients on a regular basis.  On more than a couple of times I have run into vets that a lender claimed to be giving them a VA loan to find they were doing a bait and switch.  A conventional loan with some similar name, (Veterans Choice, Veteran Select, etc.).  Heavy points and heavy closing costs and who knows what else.
2. I have seen many bad loan approval letters on offers sent in on my listings.  One claimed the buyer's funds were verified.  It fell out of escrow 5 weeks later because the buyer's did not have their cash.  The loan officer was from out of state, leaving no recourse to the seller.  Our state regulators have no authority over them and the loan officer just moves on, leaving the seller holding the bag.
3. On more than a few occasions I have seen or heard of loan officers (mostly out of state) trying to promote loan fraud. Present an inflated offer with huge cash back from the seller. They claimed to have an appraiser who said they would bring in the appraisal, even though it was a stupid price that was nothing close to the true market value of the home.
4. Recently a client of mine asked me about a friend's purchase.  They said it seemed so different then their experience.  The bottom line was they had a real estate agent who was also a loan officer and they wound up with a huge closing cost and a loan other than what they expected.

Dual services like real estate agent and loan officer or a real estate company also providing in-house lending should be strictly forbidden in my opinion.  The conflict of interest is so obvious I am amazed that any professional would go there.  There are many who will argue about how much money they can make or it is OK if you disclose the conflict.  I disagree and not only will not do it myself, but would never hang my license with any company engaging in that practice.

In Hawaii if a loan officer is from out of state.  We have to make a complaint at a federal level.  Our state regulators have no authority in this matter.

If you are a reputable lender or loan officer, why in the world would you want these folks running around doing the dirty things they do?  They not only ruin the reputation of the industry they hurt the public.

Back to my original premise: 

• If the lending industry is unwilling or unable to better protect the public and raise their standards, than government needs to do it for them.