Home Loan Borrowers Doomed To Fail – Mortgage Industry Professionals
Seattle , WA (08/30/2006) Home Loan Borrowers Doomed To Fail – Mortgage Industry Professionals “Loan Officers” Not Required Formal Training or Licensing: Federal & State Governments At Fault
“Why is it that a teenage Burger King employee receives more formal training than a loan officer in this country?” demands Consumer Advocate and International Mortgage Reduction Expert Harj Gill.
Most borrowers would be shocked to learn that the person who financed their mortgage did not undergo any formal training, examination, or certification.
In fact, only 6 States require that a loan officer pass a basic test to be certified. Another 15 only require training of between 10 to 14 hours, and the rest have absolutely no training or certification requirements at all.
These are frightening statistics when you consider that the mortgage industry generated a total of $1.8 trillion worth of activity in 2004, with 68% of home loans originated by mortgage brokers who these loan officers work for.
With record numbers of borrowers buying and refinancing their mortgages, the last few years have seen mortgage companies turn into nothing more than assembly lines.
Loan officers, who’s schooling consists of “in-house” on-the-job-training, churned out loan after loan, most of them exotic (i.e., ARMs, Piggyback loans, and Pay-Option-ARMs), without knowing or considering the long term ramifications for their clients.
Mortgage brokers holding the license were only interested in ensuring these loans complied with regulated guidelines.
“Unfortunately, just because a loan fits compliance guidelines doesn’t mean it’s the right one for the borrower,” points out Consumer Advocate Gill.
This lack of product knowledge has seen almost 50% of borrowers financed into exotic mortgages (FDIC) and who now suffer the consequences. For example, according to Standard & Poor's, first-lien mortgages connected with piggyback loans have a 43% greater chance of going into default than stand-alone first mortgages of comparable size.
Right now millions of borrowers with ARMs are about to throw away thousands of dollars by refinancing their mortgages as over $1.3 trillion worth of these loans are readjusting.
“Insanity is an understatement,” says Consumer Advocate Gill, “if these borrowers go back to the unqualified, untrained, and unknowledgeable loan officers who failed to give them proper guidance in the first place.”
“Doctors are required to pass an exam to be certified. Realtors are required to pass an exam to be certified. Even your local manicurist has to pass an exam to be certified.”
“Why is it that when it comes to the single most expensive investment of your life, there are no such compliance measures in place to protect consumers?” he demands.
“I represent over 60 million homeowners that have a mortgage and millions of these families are facing default or foreclosure because of these lax standards.”
Consumer Advocate Gill contends the mortgage industry is happy with the status quo because they have profited to the tune of the billions of dollars from it.
“That’s why we have to force changes at the legislative level that will put into effect laws requiring proper training and certification for loan officers,” he insists.
Mr. Gill has already started a grassroots consumer movement and is urging homeowners to sign his petition at the Consumer Information Center that he can present to Federal and State legislators.
He says, unless we put pressure on lawmakers, the institutional abuse is going to continue and families will continue to suffer.
Meanwhile, he has created his own set of Consumer Protection Criteria for professionals that want to join his list of Approved Loan Officers and Real Estate Agents. These criteria not only require absolute disclosure about fees and commissions, but also require loan officers to explain the ramifications of different loan products to their clients.
Consumer Advocate Gill is inviting all lenders, loan officers, mortgage brokers, and realtors that share his platform of Educating, Empowering and Protecting consumers to join his grassroots movement.
“I’m already getting business from people who saw my name being listed as an Approved Loan Officer on the Consumer Information Center ,” said David Young, a loan officer from Cleveland Street Mortgage, Inc.
SOURCE American Mortgage Educators, Inc. 08/23/2006 /CONTACT: American Mortgage Educators, Inc., 800-605-4718/
CO: American Mortgage Educators, Inc.
So according to this, the loan officer is at fault for people making uninformed decisions and getting into financial difficulties. How convenient. At what point does the consumer have the responsibility to know what product they are buying.? Is it also the LO's responsibility to determine if the client can truly afford the house they want to buy? The next time I have clients ask me if they can afford this house vs. can they qualify for it will be the first. It's the LO's job to tell the client if he qualifies, not if he can afford it. As an LO, I can recommend products all day long for stability, but if it doesn't have the lowest interest rate or the lowest payment, the consumer rarely if ever wants to hear about it. Most consumer's make their decision based on emotions and not sound financial sense. Consumers need to accept a little responsibility and learn about the largest financial decison they will make. It's certainly not as if there isn't any information available.
The notion that requiring licenses will change everything is so pollyanna. Real estate agents are required to obtain licenses and there are just as many unqualified real estate agents as their are loan officers. I'm all for licensing and continuing education of LO's if the license is not a basic test to enable the government to collect a tax each year. Make the test on par with a series 6 securities test. Requiring more difficult licensing will root out many of the unscrupulous LO's, but like every other industry, it can't eliminate them.
CAVEAT EMPTOR!
I think instead of harping on the so-called untrained loan originator or loan officer, one should be more focused on "ethics" issues. Trained or untrained, licensed or unlicensed most LO's are just seem to have a very low moral threshold.
When I started originating loans back in 1998, we got one week of in-house training from the company's executive vice president. Selling and originating mortgage loans isn't rocket science but the training was nothing short of excellent. We were even trained to do our own processing as he didn't believe in relying on someone else to "take care" of our customers.
Most mortgage brokerages and banks are just mills today. It's not about taking care of the customer or what is right for a particular customer, it's about production and generating fees - the customer comes last. In my mind, we now have a bunch of poorly trained LO's who are tantamount to licensed crooks at worst or, at best, unprofessional, undertrained sales persons having little or no sense of ethics.
Maybe I'm being harsh. Today, I spend most of my days "undoing" the harm LO's have caused as a result of a lack of integrity that permeates the entire mortgage industry. As as third party loss mitigator and real estate consultant, I have to deal with distressed homeowners who should never have been underwritten in the first place. So, the hand-wringing and whining about poorly trained or untrained LO's is moot when you consider that the "trainers" today do not teach or even offer any training on the ethical issues of being a true professional in the financial services industry of which we are part.
Instead of harping on the lack of training in the industry, EVERYONE should be more concerned about the graft and corruption eminating from the lowliest broker to the highest corporate execs in the mortgage industry.