The irony of the timing

Look, I’m not saying this is all bad, ridiculous, time-wasting, and frivolous.  There are some states that weren’t licensing mortgage professionals at all.  Buying a home and getting a mortgage are usually the two biggest financial transactions that anyone will make in a lifetime.  The people who are involved in those transactions ought to have some sort of licensing and compliance control.  If we choose as a society to regulate my hairdresser, then we probably ought to regulate people who care for people’s financial health.

Be aware:  Securities and Exchange Commission did this, too, many many years ago.  Decades later, the SEC failed for years to stop the biggest Ponzi scheme known to this country and its licensee.  I’m not sure when ethics became defined as knowing which regulatory agency would fine you or put you in jail if you ripped off your client, but that’s what I studied.  I’m not sure why it’s important for me to know that the Truth-in-Lending-Act is also known as Regulation Z or that the Real Estate Settlement and Procedures Act is also known as Regulation X.  I do know that the exams that the SEC requires are not dissimilar in the rote memorization that is required to pass the exams that allow financial professionals to manage money.  While the intentions may be good here, I’m not convinced it will have the effect it intends to have.  Bad people find ways to do bad things and seemingly do it best when someone is supposedly watching.

So, feel safer, I guess.  The bar to entry to this profession has been raised for sure.  You’ll be pleased to know that’s true even for me.  I have had to register with a national registration system, I’ve had to take a national test, I’ve had to take a state test, I’ve had my fingerprints taken (again), I’ve allowed someone to pull my credit report, and I will disclose my net worth.  Nevermind that I’ve passed the Bar Exam, the Certified Financial Planner exam, two industry certifications exams, a state exam to get my salesperson’s and then my broker’s license, and maintained my state required 45 units of continuing education credit to maintain my licensing.  I supposed DNA testing and electroshock therapy are next.

The silver lining (because I will always find one):  It’s been good for the economy.  I’ve spent over $1100 getting this done, which I hadn’t planned on spending this year.  The facilitator at the testing site said that he had been closed three days a week for the last six weeks and things were picking up again.  He was pleased to see all us mortgage people showing up to get tested.  So it goes.

Okay, I’m done. Rant over.

When we look just at the numbers from 2009, it feels and seems like a great year.  But it’s been tough—more regulation, daily underwriting guideline changes, new rules around appraisals, and loan files that are scrubbed with a toothbrush.  We’re lucky to be able to channel our loans through a company that has had the foresight and fortitude to survive, but it’s been twice the work for half the money.  And it’s getting worse.

The unfortunate part about all these changes is that they don’t serve the consumer at all.  Loans take more time and are more expensive.  There are fewer options in loan products and lenders.  The paperwork and the confusion have only increased.

The good news in this is that the market and the increased regulations have driven out the bad apples in the business.  There’s no more low-hanging fruit, so those who didn’t know what they were doing or were doing it badly have long since left the business.  In a way, the market alone has solved a lot of the problems that were created in the subprime and “stated income, stated assets” loan profile industry.  Those of us who continue to run a high quality business have survived.

The sad part about it is that I’m starting to see the really good people—true mortgage professionals who provide great advice and care for their clients—start to consider leaving the business.  The loan process is too complicated and sophisticated for anyone to learn in a 60-day escrow. Most financial planners understand the basics of loans, but often rely on mortgage professionals to help them integrate the loan choice into a client’s overall long- and short-term financial plans.  Where will good advice come from if not from a seasoned mortgage professional?

What can you do?  If you’re politically inclined at all, write your Congress representatives and tell them that you believe the Federal Reserve’s proposal to fix the income of mortgage professionals on any size loan will not serve consumers (particularly those with lower loan amounts), that you appreciate the work of mortgage brokers and bankers, and that the regulations put in place so far have not served the industry well.