Loan Originator Licensing Update
Rhonda Porter on 05 21, 2007
An article in yesterday’s Seattle PI provided an update on our state’s Loan Originator Licensing. It fails to [photopress:MPj04331630000_1_.jpg,thumb,alignright]mention that only Loan Originators who work as for Mortgage Brokers are required to meet the state’s guidelines. If a Loan Originator works for a bank-mortgage company or credit union, they do not have to take the same steps as those of us who broker mortgages.
At first, having mortgage-banks and credit unions excluded from the state law was really be a sore spot for me. Now, I’m starting to see this as a distinct advantage over bankers and credit union employees. Working with a Licensed Loan Originator means that the Mortgage Professional has:
- Passed an extensive background check from DFI and the FBI.
- Passed the DFI’s Loan Originator Exam (I believe this will be available next month).
- Must continue their education via required courses annually to maintain their license.
- Have a License to lose, if warranted.
I do wish that ANYONE originating a mortgage had to abide by the same legislation. I think it’s less confusing for consumers and others in the industry if we all have to play by the same rules.
Here is a small sample, according to the PI, of LO’s the DFI has rejected:
One loan officer had a conviction for possessing stolen property.
Another had his securities license revoked for unethical practices that resulted in two elderly women losing about $374,000.
Yet another loan officer had been convicted of extortion.
The state has barred three dozen loan officers from doing business here, mostly because they didn’t pass a state and federal criminal background check. Another 78 applicants likely will be denied, but administrative orders hadn’t been issued in those cases.
A thinning of the professional pool is always good if you’re left in it! It will be interesting to see where the Loan Originators rejected by DFI will wind up employed.
So far, I have attended my two required classes: Ethics (required for all Licensed Loan Originators in the first year of having a license) and just last week I went to a class on Reverse Mortgages. Next, for me and thousands of others who have passed their background checks….the dreaded exam! I would be lying to you if I told you that I am not a little nervous over the test. I was on pins and needles after taking my CMPS exam (I passed with a 91%).
The next waive of “fall out” will be from the Loan Originators who decide that either they don’t want to take the exam or cannot pass the exam. It is expected that only 75% of Loan Originators will pass. I’m sure we will have a continued “weeding out” of Mortgage Brokers with the background checks as well. It really is nothing but good for those of us who are Licensed Loan Originators.
How can you tell if you’re working with a Licensed Loan Originator?
We have been issued an attractive license number that must be displayed on all of our marketing, business cards, websites, correspondence, etc. My number is 510-LO-32047. It does not have to be posted in our place of work. You can always ask a Mortgage Professional if they are licensed and/or check DFI’s website (less is more when entering the data to check for a license).
DFI is still processing the massive applications (13,000 Loan Originators) and is not expected to be finished with background checks around mid-August. Loan Originators who have not yet been rejected by the state are allowed to legally operate until they receive their license.
About the Author: Rhonda Porter
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35 Responses to “Loan Originator Licensing Update”
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Hi Rhonda,
I, for one, am pleased to see the additional requirements and I’m also glad that you’re still swimming in the “pool”. I expect you’ll be there for quite some time. Thanks for sharing this important information with the public.
- Reba
Thanks, Reba! I should probably be careful with my comments about banks and credit unions…if I don’t pass the exam next month, I might have to go work for WaMu!
Lord knows they could use someone like you about now considering what has been going on in their residential lending departments locally, but let’s hope it doesn’t come down to that…
Hey Rhonda, dittos here. In Collie-for-knee-ah, the barrier to entering the mortgage business is pretty low, but at least mortgage brokers have to take some courses and pass the real estate license exam. And, we have to disclose YSP, which of course those who work for banks do not.
Raise the barriers! Two things will happen: fewer people will rush in to capitalize on the “easy money” during the good times, and abuse will be curtailed.
No worries, Rhonda. You’ll do just fine. The mortgage industry needs a good weeding. That being said, there are some terrific professionals in the mortgage business. A great mortgage professional should be part of everyone’s professional team.
Thanks Reba, Marc and Greg! I do agree that nothing but good will come from the weeding of LOs.
I’m rooting for you and the success of the LO licensing process. I wish that they had tightened it up just a bit more by not allowing concurrent licensing as an LO and RE agent. As far as I’m concerned, even in the highly unlikely case that one was able to perform competently in in both areas, the opportunities for conflict of interest are too great.
I agree 100%, JD. At the very least, the state could not allow a person to act as a LO and agent on the same transaction (make the LO/Agent choose one profession per transaction and not perform both).
Hi JD and Rhonda,
What if that person who was licensed as both a real estate agent and as a loan originator, was actually quite good at both, and could also save the consumer some money?
In every class I teach now, there are at least two or more real estate agents that also originate loans. They tell me they decided to do both because:
1) They were frustrated with the existing level of low quality service, lack of knowledge given to their clients by other loan originators, along with high fees/junk fees charged by same LOs. They tell me they could do a better job for their clients, and;
2) They tell me the reason they do both sides is because they have the ability to negotiate their own fees in such a way as to gain clients.
In some cases, a consumer can save money and also receive comparable, if not slightly better experience.
Of course, not all hybrids (Dual real estate agent and LO) are knowledgeable, competent, and fair on prices. However, hybrids have passed their state exams….
So someone has deemed them competent.
Not surprisingly, The Nat’l Assoc of Realtors continues to fight the fight of keeping banks from selling real estate, yet many of their Realtor members originate loans as a hybrid Realtor/LO.
Realize that under RESPA, CORPORATIONS can do both real estate and lending. So why not individuals? As long as they follow the same criteria of full disclosure, and so forth.
“hybrids have passed their state exams….” not for being an LO…yet. Jillayne there is too much in either profession to do both effectively. I also would think that the so called “hybrids” who are saving their clients money are a minority. The post I wrote about a few weeks ago, http://www.raincityguide.com/2007/04/17/are-you-leaving-too-much-on-the-table/, involved a “hybrid” agent/LO.
Jack of all trades…master of none.
Ardell, the front page of Rain City has a question about whether or not they should buy a home in Seattle now or wait… http://blogs.king5.com/citizenrain/2007/05/home_prices_go_from_sizzle_to_1.html
Jillayne, recently I had a transaction close where they buyers did not want the agent to know much they qualifed for and what their assets were. When they went on a vacation out of state for a few days, the agent called me prying for their private details, what separation or protection would a consumer have if the agent/LO (sorry, I don’t think they’re hybrids) has all of their information? I think the more people the buyer has looking out for them, the better.
Rhonda re 11#, that’s like someone calling you and asking if they should do a one year arm. Can you answer if that is the only thing you know about them? Of course not. It depends WHAT your are thing of buying and WHY. It’s always a bad time to buy some things. It clearly is not a good time to go out there thinking everything is going to go up, mo matter what it is.
Every home I have bought has been because I liked it. It was emotional. I did not factor the market or should I wait… it was just the house for me!
Rhonda re 12#
I hate when listing agents call the LO of the buyer without getting the buyer’s permission in advance. Often the buyer will give the OK for their hired professional, the buyer’s agent, to stay in the loop. But often the LO is confused and says things to the Listing Agent they should never say.
I don’t think any LO should give info to anyone except the borrower, without written permission to do so, and that written permission should include the actual name of the person the LO can share info with.
This is true whether the buyer gives the LO instructions or not. It’s a given that the borrower’s info is confidential between the LO and the borrower…or is it? Are you saying the buyer has to instruct you not to tell, in order for that info to be kept private?
I do need to say to the buyer, “OK, you want me to write this at 20% down. So you have $60,000 to make the dowpayment and cover the closing costs, right?” I do need to ask that in order to write the offer, as the buyer’s Earnest Money is not protected by the Finance Contingency if the loan failure is due to not enough cash to close. But I don’t need to know if he has $400,000, if he only needs $60,000 of that in order to close escrow.
Is “the agent” you are talking about HIS agent or the seller’s agent?
Hi Ardell,
The agent was their agent…even so, without the buyer’s permission, I’m not going to disclose their info…in this case, they had expressed not wanting the agent to know. From the very beginning the agent was wanting to know how much more the buyers qualifed for (it was a high end home they were buying)…they all ready had a p&s they were approved for.
We have strict privacy laws we must adhere to. Often times, if the buyer wants the agent to know, they’ll tell the agent directly.
In this case, I told their agent I would need to discuss his questions with the buyer and get their permission. I’m sure he was less than pleased with me. When I talked with the buyers, they did not want the agent to know more than he did regarding their finances. The agent was wanting to know more about their assets because they were buying contg. and received a bump….the transaction did close just fine without any issues.
In my mind, this is one big reason why buyers should not work with a agent who is also going to be serving them as the LO. If the agent, in this scenario, knew about the buyers assets, he may have been influenced to not write a contg. offer and may have tried to steer the buyers structuring their finances differently (which they did not need to do).
Rhonda: Questions for you regarding a particular situation:
Loan amount: 489K after roughly 26.6% down, credit scores about 770. Was quoted 2 options by lender last evening and I dont like them:
Option 1: Jumbo loan for entire amount, no points, 6.25%.
Option 2 a: Non Jumbo for 417K, and 72K as balloon loan
Firstly, let me state what we are trying to do here: 1) we want a fixed rate loan and not a risky option like ARM 2) we are not sure how long we will live in the house but say 5+ years 3) we do want to be able to make extra payments towards the principal. 4) dont like the balloon idea at all, would prefer loan 2 also over 30 yrs, with flexbility to pre-pay.
In the GFE I dont understand several items including
1) pre-payment penalty and how much this can be?
2) If we pay off loan early we will not be entitled to a refund of part of the finance charge. What does this mean?
3) What does it mean when it says this loan does not have a “demand feature”
4) Rate lock – does it imply if the rate goes down say in the locked period we still wont qualify for the lower rate?
5) What does it mean when it says some one buying this property cannot assume the remaining balance due under original mortgage terms
6) Does filing fees of 75$ sound right?
7) Typically do the pre-paid items involve a) interest for 3 days b) real estate taxes for 5 months c) hazard insurance premium d) hazard insurance for 2 months? Does this sound right?
Rhonda: Questions for you regarding a particular situation:
Additional data from GFE f or 417K loan
Line 803: appraisal fee: 350
Line 804: credit report fee 20
Line 809: Tax service fee 65
Line 810: Processing Fee 250
Line 811 Underwriting fee 565
Line 1101 Settlement or Closing Fee 750
Line 1104 Escrow courier wire 65
Line 1108 Title Insurance 700
Line 1208 Recording fee 85
Line 1303 Flood Inspection 16
Hi Sandy, is this a purchase or refi? Is your question regarding if the fees are in line? Is this from the Puget Sound area? It’s tough for me to comment without knowing all the facts. You’re welcome to email me your Good Faith Estimate for me to review so I can really provide you with a better answer.
Title and escrow charges are third party. If this is a purchase, escrow (line 1101) would be based on the sales price and the title (1108) should be based on the loan amount.
Hey, it looks like my first posting is gone
re=posting.
this a purchase and not a re-fi. Yes my questions are regarding the fees – if they are inline for a new home. Basically is there anything else I must anticipate? Purchase price is 667k and loan amt is 489K
My Original Post:
Rhonda: Questions for you regarding a particular situation:
Loan amount: 489K after roughly 26.6% down, credit scores about 770. Was quoted 2 options by lender last evening and I dont like them:
Option 1: Jumbo loan for entire amount, no points, 6.25%.
Option 2 a: Non Jumbo for 417K, and 72K as balloon loan
Firstly, let me state what we are trying to do here: 1) we want a fixed rate loan and not a risky option like ARM 2) we are not sure how long we will live in the house but say 5+ years 3) we do want to be able to make extra payments towards the principal. 4) dont like the balloon idea at all, would prefer loan 2 also over 30 yrs, with flexbility to pre-pay.
In the GFE I dont understand several items including
1) pre-payment penalty and how much this can be?
2) If we pay off loan early we will not be entitled to a refund of part of the finance charge. What does this mean?
3) What does it mean when it says this loan does not have a “demand feature”
4) Rate lock – does it imply if the rate goes down say in the locked period we still wont qualify for the lower rate?
5) What does it mean when it says some one buying this property cannot assume the remaining balance due under original mortgage terms
6) Does filing fees of 75$ sound right?
7) Typically do the pre-paid items involve a) interest for 3 days b) real estate taxes for 5 months c) hazard insurance premium d) hazard insurance for 2 months? Does this sound right?
Wow, Sandy…you have a lot of questions! I’ll do my best to answer them. (I’m surprised your lender hasn’t). The Jumbo loan amount at 6.25% and no discount and no origination points (lines 801 and 802) is a solid rate. I’m assuming the rate is for at least 45 day lock? I did not see a rate for the conforming (non jumbo) with the second mortgage… if you can provide that to me, I can compare scenarios.
1) There should not be a prepayment penalty for your loan with your credit scores (unless the LO gave you the option to have one for a lower rate). If you’re looking at the Truth in Lending, if the box that says “may” have a prepay penalty, contact your lender asap to find out why and how much. Typically they’re 6 months interest and I recommend avoiding prepays…
2) Typically this applies to FHA loans. You won’t have any finance charges to be refunded.
3) A demand feature means that the bank/lender can call the note due because they want to. Your mortgage is a deed of trust with specific set forth on what would allow the bank to be able to call the note due (fraud, not making your payments, etc).
4) Depends on your lender. In most cases, if you lock in your loan you have committed to that rate. Some lenders will break a lock during the transaction to obtain a lower rate if rates go down.
5) Most mortgages cannot be assumed. Someone buying the property will need to apply for a new mortgage. Plus, you wouldn’t want to be liable for someone making the mortgage payment that is of record (credit and public) as yours.
6) Sounds in line. That’s the cost to record the mortgage (Deed of Trust) and possibly an Assignment of Deed of Trust.
7) I should write a quick post on this!
Check back in a few moments and I’ll answer 7 in a post to you.
I’m interested if you have a prepayment penalty or not.
[...] Reserves and Prepaids on the Good Faith Estimate May 22, 2007 Sandy asked a series of great questions regarding her good faith estimate that she’s received for the financing of a home she’s going to purchase. I should have answered all 7 questions in a post…I got down to the last question and here I am! “Typically do the pre-paid items involve a) interest for 3 days b) real estate taxes for 5 months c) hazard insurance premium d) hazard insurance for 2 months? Does this sound right?” [...]
I would like to add to your comments and point out to you that the reason Banks do not fall into the catagory for this new liscense is that Banks have already had these systems in place. We are already monitored by the Federal Government and undergo audits all of the time. Employees are always background check and credit checked. They are always constantly being trained and monitored for compliance. That is why they did not fall under the radar of the DFI or the FBI as they are constantly being watched. Banks have always had to answer to a higher standard and it is the Brokers who did not get the monitoring that they should have. May I point out that many LO’s started in a Bank and where trained in a Bank. I do feel that the monitoring and testing is a good thing and I think it will make the general public feel safer from the fraudulence that is giving Brokerages a bad rap. So your comment of “I do wish that ANYONE originating a mortgage had to abide by the same legislation.” Well now we do.
Thanks
Susan,
thanks so much for your comments. I would love your feed back on the following (you’re the first banker to comment):
1) Are all Loan Originators personally required to go through background checks from the FBI if the work for any bank? (As a Mortgage Broker and a direct lender, we go through audits all the time, too).
2) Do LOs who work for a bank have to pass an exam?
3) Do LOs who work for a bank have to maintain their education?
I’ve had several transactions where the client started with a “bank” mortgage co. and left from questionable treatment.
I’ve also had mortgage co./banks try to hire from our company telling LOs “you won’t have to pass an exam or go through the hurdles that a mortgage broker does”.
I’m not so sure about LOs starting off at a bank. I started off in the title and escrow industry. Our market has been so strong, I’m afraid that LOs EVERYWHERE (bank, broker, credit union) just had to have a pulse and be able to hold a conversation.
If bank LOs all ready have a background check, why not step up to the same plate the brokers are being held to and do the rest (clock hours, exams, etc). It should be a piece of cake for any banker, right?
Well my question of the night is:
WHY DIDN’T SANDY’S LOAN ORIGINATOR EXPLAIN ALL THIS TO HER in easy non-legal language, so Sandy could become truly informed about these loan products?
WHY IS SANDY LEFT TO GET ANSWERS FROM A BLOG?
Why does Sandy trust us, and not her loan originator?
Am I the only one wondering this?!!!??
Sandy, my questions are as follows:
What is showing on line 801 and line 802 of your good faith estimate?
Look down towards the bottom of the good faith estimate. Is there anything like this showing up:
“Yield spread estimated to be between _____and______”
or “YSP estimated to be between_______ and________”
Jillayne, Sandy might just be confirming what her LO has provided her…giving her LO the benefit of the doubt. If a Doctor had diagnosed me “boogy-ectus”, one of the first things I would do would be go check it out on the internet. It’s the world we live in. I’m flattered that Sandy trust me enough to ask the questions.
If she didn’t ask her LO these questions or if the LO could not answer the questions, then I would have to wonder why she’s working with this LO, too. I did ask her to email me her GFE and TIL so I can review it for her (I actually love doing this) but I have not seen it.
Sorry, I did not get a chance to comment back I did just so happen to be in a training last week that was manadatory. I can not speak for all banks as they may have different requirements but we all do have to be compliant and I do know that they do background checks. They have too. We are governed by different entities to a degree then Brokerages therefore, the reason for the difference in requirements.
Do we have to pass an exam? No, but you won’t get the job if you don’t know what you are doing, nor keep it.
Do we have to maintain your education? Yes, if we want to keep our job.
To take continued education and to be licensed is great regardless of wether you work at a Bank or Brokerage but what I feel is the real meat of it all is that finally there is some standards for the Brokerages that they did not have to have before. Banks have because they have always been monitored. That is the main point. What sets the Bank and Brokerage a part is none other than good customer service so with that said, I won’t comment on all the other remarks for they are “remarks” that sad to say do happen whether you are in a Bank or a Brokerage.
Bottom line customer service is always paramount and so is integrity. We can only hope that these changes help the consumer to feel safe when they choose to work with a Bank or a Brokerage.
Susan,
“Do we have to pass an exam? No, but you won’t get the job if you don’t know what you are doing, nor keep it.
Do we have to maintain your education? Yes, if we want to keep our job.”
Banks are not held to the same higher standards that a broker is by the State of Washington. You just proved it.
We all have to stay educated and know what we’re doing to do a good job. Some LOs just need to produce to stay employed. Unless they work for a broker, they are not REQUIRED!
I see your point but I guess I do not feel the same way as you. The standard is good on both sides is how I feel. I used to work in a Brokerage too and so I have seen both sides and I think that this change is awesome for the Brokerages and I think the general public needs to also know that Banks are monitored and have always been and within the Banking institutions the Mortgage Consultants do need to know what they are doing. If they don’t they too have accountability. Maybe to a different source but there still is accountability.
I appreciate your point and love reading your Blogs! The consumers need to know all that they can and I think this is a wonderful way!
Susan, I have to give you kudos for being the only “mortgage banker” to ever comment about licensing.
I appreciate that Rhonda.
NOTE: I passed my DFI Loan Originator exam this morning.
That is awesome!
Now you are dangerous!
Moooeeehh ahh ahh ahh!! (okay…that’s my best attempt at typing the Dr. Evil laugh).