Many of today's Florida licensed mortgage brokers and Loan Originators lack the necessary skills to truly assist consumers in securing the best financing arrangements possible, due in large part to the fact they are poorly trained, lack the most basic skills necessary to truly understand all facets of mortgage lending, and possess little or no experience in residential mortgage lending, as well as offering too few mortgage loan programs for consumers to choose from.
Under Florida Law, an individual can be licensed or unlicensed to originate residential mortgage loans, depending on the type of business entity they choose to employ under. Licensure is required for employment under a Mortgage Brokerage Business only, whereas employment with a mortgage lender requires no licensure at all.
For those individuals who choose licensure, education requirements by Florida law are limited to a 24 hour class that basically teaches an individual how to pass the state licensure exam. The core principles of the 24 hour class deals with Federal & State law, with a basic review of underwriting guidelines set forth by Fannie Mae and Freddie Mac. Very little can be taught within a 24 hour period (usually a Friday evening followed by two full days on Saturday and Sunday) to educate the average individual. After successfully passing a state exam, all that is really required to maintain licensure is 14 hours of continuing education every 2 years, which is typically completed online through an ‘honor' system.
Once an individual is licensed, they are required by law to place their license with a business entity licensed to broker loans in Florida. Many of the mortgage companies licensed in Florida lack any form of hands-on training for newly licensed individuals, leaving it up to the licensee to learn as they go. Many of these same mortgage companies offered few mortgage loan programs, with little guidance from their companies, many licensees choose to take the path that leads them to quick loan closings.
Enter the subprime mortgage lender.
Subprime mortgage lending offers a breadth of loan programs with liberal guidelines towards credit and income, offering higher loan to values than most conventional loan programs. Unlike government mortgage loan programs with stringent underwriting guidelines towards credit and income, subprime lenders offered underwriting guidelines that are loose in comparison, making it much easier for consumers to qualify for most programs. High risk mortgage loans required high risk interest rates, including costly prepayment penalties to the consumer. For those licensees whose companies did not offer more competitive, less risky mortgage loan programs such as FHA, VA, or Conventional, subprime mortgage loans meant closing loans and earning commissions, regardless of the overall benefit to the consumer.
Subprime mortgage lenders made it possible for mortgage brokers with little or no knowledge of residential mortgage lending to earn big commissions with little work involved on their part.
In 2000, the state of Florida had just over 20,000 licensed mortgage brokers. Today, there are over 81,000 licensed mortgage brokers licensed in the state of Florida. These numbers do not include the multitude of unlicensed Loan Originators working under licensed mortgage lenders, many of whom do not reside in the state of Florida.
The correlation between the heated mortgage refinance market of 2003-2006 to that of the dramatic increase in the number of newly licensed mortgage brokers in Florida is unclear, however the large number of mortgage loans originated through subprime mortgage lenders by untrained, inexperienced mortgage brokers during this same time period does give cause for concern.
Studies have shown that many consumers who received subprime mortgages with high interest rates & prepayment penalties would likely have qualified for a low interest, fixed rate government mortgage loan such as FHA.
Ultimately, the choice of mortgage broker or mortgage lender falls squarely to that of the consumer. Choosing an inexperienced mortgage broker to originate your mortgage loan or choosing a mortgage lender who offers a limited number of loan programs that may be unbeneficial to the consumer is exactly their choice.
Regardless of how uneducated or inexperience a mortgage broker or loan originator may be, it is up to the consumer to choose the mortgage loan program that best fits their needs, and not that of the mortgage broker or mortgage lender. Absent the legal language of most contractual agreements, there is nothing that obligates the consumer to choose a mortgage loan that is unbeneficial, or a mortgage payment that is unaffordable. Shopping for the mortgage that best fits their individual needs requires research that is not limited to rate shopping.
Experienced mortgage brokers that offer a wide array of mortgage loan products that includes low, fixed interest rates, no prepayment penalties through FHA, VA,& conventional mortgage programs gives consumers the choices they need to make better decisions about their mortgage financing needs. High pressure sales people with little or no knowledge of residential mortgage lending do a complete disservice to consumers as well as the mortgage industry.
With many of the subprime mortgage lenders out of the mortgage business completely, perhaps a tide may be turning that will force many mortgage brokers and loan originators to either learn the residential mortgage lending business the way it should be learned, or get out of the business all together.
Either way, the consumer will benefit, going forward.
Mike Sikorski, MBA, GRI
Licensed Real Estate Broker
Licensed Mortgage Broker
Florida Realty Network LLC
22079 Kimble Avenue
Port Charlotte, Florida 33952
Phone 941-206-6000
Email Mike@FloridaRealty.net
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