Recently there has been a larger push for self-regulation within the mortgage industry. On January 10 – 12th, the first “Mortgage Revolution” will take place in Atlanta. When explaining why there is a need for a mortgage revolution, their site site explains,
Because we’re not happy with the way things have been…. and it is up to us to make a change.
We’re tired of the media painting all originators as crooks, we’re done with unprofessional and unethical loan officers playing bait-n-switch with our clients and making us all look like liars.
We’re on a mission to prove that transparency can exist in the lending world.
The purpose of the Mortgage Revolution is to create “a grass-roots movement of real loan officers joining forces for the future of our industry.” It is good to see that there are many that care for the mortgage industry. This is especially important because if we do not find a way to self-regulate, the government will do it for us. However, I’m afraid that the 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 and YSP) disclosure. This is why we are seeing the dramatic revisions to RESPA (new GFE) and TILA (potential flat-fee compensation).
The biggest problem revolves around the fact that mortgage lending is 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, we have to break the barriers between federally chartered banks, mortgage bankers and mortgage brokers. I hope the grass-roots efforts at the Mortgage Revolution can lay a proper foundation.
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