A Mortgage Revolution – We Need A Mortgage Originator Code of Conduct
It is time for a Mortgage Revolution…
Thought I was done howling about HR1728 and Mortgage Reform?
Sorry – Until this industry develops a way to regulate ourselves from deep down in the trenches on up, we will always have threatening political pressure from government influences.
I’ve been a Las Vegas loan officer since 2000, which means I contributed to the housing bubble and foreclosure mess that my city is in. Sub-prime loans, 100% No Doc loans, Alt-A, Option Arms…. were all tools that I used to help my mortgage clients purchase real estate.
We tip-toe around this foreclosure crisis blame game, but I’m willing to bet that most of the loan officers who practiced in boom cities like mine all have a database of past clients who are upside down, going through foreclosure, and having their families torn apart by the mortgage transactions we facilitated for them.
I’m sorry. I am truly and honestly heart-broken over the mess that I helped people get themselves into. I take full responsibility for presenting, packaging, and submitting some of these exotic loans that the supporters of HR 1728 are fighting to outlaw.
I could have easily told my real estate agents and clients NO – go find one of the other 38k registered NV loan officers to help you with that crazy scenario. But, I didn’t. For the sake of my past clients and local economy, I wish I had of.
I don’t blame people for hating the way my industry has represented itself.
However, in my defense, my clients always received a 4 payment / program sheet at the time of application that gave them the options of choosing a 30 year fixed to a 3 yr. I.O ARM.
Unfortunately, I was introduced to the mortgage industry during a time when understanding “Creative Financing” was the measure of a good loan officer. Not an excuse, but I share the same story of thousands of other loan officers who got into the business around that time.
Actually, I only knew one other friend who was a loan officer at that time, but things rapidly changed within a few years.
Business was good, my referral partners kept the deals flowing, my clients loved the service and speed of the team, and I was too busy to pay attention to the big picture.
Every day I’d check the fax machine and my mail box for bank flyers promoting the new “If they have a pulse, we’ll fund your loans” special of the month.
Half of my day would involve sorting through the hundreds of “Almost There” client files, and the last half of the day I made phone calls to anxious buyers excited to tell them I found a new program that might fit their unique scenario.
It all started to end in late 2006 and early 2007. The Valentines Day massacre, where a local bank closed its doors and laid off 600 employees, was the big reality check that spun me off limping in a new direction. Our office just happened to be in the same building under their corporate head quarters, so it was mass chaos all around that week.
That wasn’t the only mortgage company that shut its doors during 2007.
If you’ve got an hour to invest, these two podcasts will give you more insight than you probably want to have about the credit crisis and sub-prime mess:
- This American Life – The Giant Pool of Money
- This American Life – Another Frightening Show About The Economy
Either way, please forgive my brief public apology, though I think more loan officers should step up and do the same thing.
Back to my original point -
A grass roots movement – talk of a Mortgage Revolution is being circulated by the street level loan officers who are still standing.
Through blood, sweat and tears, we are still in the game. Not without scars and sacrifice, but we are starting to mobilize and fight to change popular public opinion so that our clients and the media will start treating this business as a real profession to be proud of.
I remember how proud I use to feel when I told people I was a mortgage professional.
I want that back, but we have to earn the right to actually call ourselves professionals again.
My own mother-in-law is too embarrassed to tell her family and friends that I’m a loan officer.
Who else has a spouse, friends or family member that questions your integrity or vision for staying in the business when all they hear on the news is how evil you are?
I’m mad as hell, and we’ve got to fix some things.
Mark Green posted an article about developing a standard Mortgage Code of Ethics on his blog today.
Industry leaders are already taking the initiative to write about it and organize the troops.
While I agree with regulation from Washington, we shouldn’t leave it completely up to the politicians and lobbyists to define our roles as mortgage professionals.
Whether you are developing your own online community to battle back against the negative media influence over the real estate and mortgage industry, or just forwarding blog articles like this to your colleagues, it is time that we participate in the change… before someone else forces it on us.
May 23, 2009 by Mark Madsen · Leave a Comment
Tell me about the battleback…
Word up Mark, it's on like Donkey Kong.
I'm sick of all the finger pointing and negativity too. We know the industry is broken. We know why it broke. Now it's time for us to take it upon ourselves to fix it.
Let's get 1,000 of the industry's best together in one place and start hammering that rock.
If you're curious for details on Mortgage Revolution, the site's under construction and will be located at http://www.mortgagerevolution.org . I also think there's a Twitter hashtag #mrev, Facebook Group, Linked In Group, etc.
Thanks for writing this killer article.
Although, I value your effort with regards to taking the blame for the mortgage mess. Remember, neither you or I created the financial instruments that led the banks and lenders packaging and sell the “exotic mortgages” on the open market.
In other words, we did not put the product together, it was presented to us as a solution for the clients.
Mark,
I agree with your post. If we do not find a way to self-regulate, the government will do it for us. However, I'm afraid wind of change is already blowing in that direction with the current political climate. Although I wish it was, I'm not sure that our industry is currently equipped for self-regulation.
Teaching the NMLS courses on federal regulations and ethics here in Arizona has been an eye-opening experience for me. There is a great divide between the perspective of the advocacy groups and that of most mortgage professionals — especially when considering the need for financial (compensation) disclosure and YSP. This is why we are seeing the dramatic revisions to RESPA (new GFE) and TILA (potential flat-fee compensation).
As you're aware, the biggest problem revolves around the fact that we work in an extremely fragmented industry. We are regulated by multiple agencies on the federal and state level and there is a history of inter-agency contention and competition for control and staying-power. We are employed by large national banks, independent bankERs, or mortgage brokers who compete against each other for market share and typically do not share common goals. We do not have strong professional organizations (compared to REALTORS or CPA's for example) that support and lead us. Lastly, the historically low barrier to entry into our profession has allowed for the in-and-outflow of individuals who simply do not belong in a position that requires a high level of professional care.
Ideally, we could self-regulate and our industry could operate under a strict code of ethics that sustains current regulation and is controlled by the application of judicial precedent.
Personally, I like the Code of Ethics that is pledged by the National Association of Mortgage Brokers that includes:
Honesty and Integrity
Professional Conduct
Honesty in Advertising
Confidentiality
Compliance with Law and
Disclosure of Financial Interest
In order for our industry to self-regulate and adhere to a code of ethics, the code of ethics has to break the barriers between federally chartered banks, mortgage bankers and mortgage brokers. I hope your grass-roots efforts at the Mortgage Revolutions can lay the proper foundation.