We have all seen and been through a lot of changes in our related industries over the last three and a half years since the credit crisis put a stranglehold on the lending industry and sent the housing market spiraling downward. Loan officers have arguably had the most change to their industry with the HVCC which doesn't allow any communication between the appraiser and the L.O., the NMLS which requires all loan officers to be registered nationally and those who aren't employed with a National Bank have to pass a the S.A.F.E. test and be nationally licensed (many loan officers who can't pass the test are seeking employment at the big banks or leaving the industry - can we say "average at best?"), and the GFE 2010 which does nothing but completely confuse the buyer and add more pages to what used to be a 1-page Good Faith Estimate, to name but a few. While probably well-intentioned, these actions have been horribly misguided, have increased the overall cost to the borrowers and actually make them more confused, not less.
Like Realtors, loan officers are having to work about 10 times as much on a transaction only to get paid a small fraction of what we used to get paid. With loans much smaller due to the huge decrease in housing prices, smaller splits from employers and with increasingly stricter underwriting guidelines causing L.O.s to work on more files that don't close, our pay has already been drastically reduced. Furthermore, I would argue that the percentage of loan officers committing fraud in the industry has reduced drastically because the easy money is gone. None-the-less, the Fed rule and the Dodd-Frank act are targeting loan officer compensation and trying to make it even harder for us to get paid.
My partner was contacted by a Realtor who had a client who needed an approval quickly so my partner rushed over on that late Friday afternoon to help out only to find that it was for an investment property loan on a condo for less than $50,000. In Vegas, there are about ZERO condos approved by FNMA and FHLMC and Section 32 makes it nearly impossible for us to do loans less than $50K - especially investment property loans. After my partner finished with that they started discussing the Dodd-Frank act and the Realtor for whom my partner rushed to help said that he thought it was about time that somebody did something about our compensation - he thought we were way overpaid. My partner showed great restraint and tried to educate the agent about how things really work - to no avail - and then he left. The truth of the matter is that this act takes choices away from the borrowers. In most cases, borrowers will have to pay more money up front and many experts believe that loan officers will leave in droves to go to industries where they can make a decent living. If the S.A.F.E. Act test eliminates lots of loan officers (like it's doing) and then a bunch more are eliminated through the Dodd-Frank act, this could really foul up the Realtors' business as well requiring the remaining loan officers to handle volumes of loans far beyond their capacity. Additionally, who's to say that the law-makers won't target Realtor compensation next?
It is my belief that we all need to come together and support each other to prevent these laws and other future attempts from crippling our industries even further. Here is part one of a three part video series to help give you a better understanding of what we are up against: http://www.thinkbigworksmall.com/mypage/archive/1/55197/ and part two is here: http://www.thinkbigworksmall.com/mypage/archive/1/55198/.
Part three will come out tomorrow so feel free to subscribe to TBWS Daily if you don't subscribe already and please join with the loan officers to fight against this misguided act. We need lots of good, honest, competent professionals in our industry to get the job done right and to help the housing market recover. Please feel free to share your thoughts and comments below.