Licensing, New Regulations, HUD, and NMLSR
This post may seem directed at only loan officers and mortgage professionals, but borrowers may at long last see our plight by reading this post. We are here to help you, the borrower. Sure, we make money at what we do. But it is well deserved if you’ve spent even five minutes with any of us. It seems these days that a flood of regulations has taken effect. The mortgage tsunami has hit. But it’s been coming in wave upon wave for nearly a year. I have said many times we do not have an advocate; maybe we have the Mortgage Bankers Association and NRMLA, but is anyone listening? Did HUD listen to our cries? Had we had true and effective representation these stringent rulings would never have passed. Why doesn’t HUD talk to the loan officers who are in the trenches every day or to the senior homeowners who look to their government to help them? We in the industry have been deluged with HUD’s NEW Mortgagee Letters with SO many changes that it feels like a huge tidal wave. I am just weary of all the new things we’ve been hit with due to all the new regs and laws and tolerances and time constraints. Three days this, seven days that! The NEW Good Faith Estimate is a good one. It is longer and much more complicated. I pity the poor borrower! Is it all being done to overwhelm us loan officers? Or to help our borrowers as we have been told? We are supposed to enjoy this business and help seniors. How can it help if borrowers have MORE paperwork to read (and oh how they HATE all the paperwork– ask me how I know!)? And if their closings are delayed how does it help? This business is now RIFE with more paperwork than ever before, and there is MORE and MORE to explain to the poor senior who only wants his money! I feel like I live in old Russia with the Bolshevik’s breathing down my neck and me running from them while I try to survive! We must unite or we are all doomed to more of the same!
Now for today’s blog. I thought I would cover the test, the NMLSR National Component, required by the SAFE Act which went into effect 7/30/2008 (all loan officers must be tested and licensed.) That is if you don’t work for a bank! The National Mortgage Licensing System and Registry (NMLSR) made up by regulators, began implementing testing first for the national test and now state tests for each state you are licensed in. (There are different training companies and testing agencies such as Pearson Vue, Abacus Mortgage Training, Accelerated Training Systems, etc., as well as many others.) Borrowers will be able to go online to check and see who is licensed and who is not. Certain states are behind, such as New York in issuing licenses, and at one point they were six months behind. However, New York State Banking Dept. has issued Pending-Accepted status so those originators are approved to originate loans until New York State Banking issues their licenses. Now, as for the national mortgage test, there was a 40% failure rate on the national test, but it’s a little better — 68% are passing or least that’s the statistic for 12/31/2009. I’ve been in the mortgage industry for eight years, specializing in Reverse Mortgages for six. I love what I do. But never in my career have I seen so many changes in so short a time. We all want to protect our borrowers, but the overwhelmingly stringent changes do nothing but add more paperwork for us and them and more confusion to what some borrowers already view as a “difficult to understand” loan. Sure, to us it’s easy. But when older borrowers see numbers in front of them and more paperwork to be explained, they become bewildered.
Back to the SAFE test. Licensing all mortgage originators is a wonderful idea and should have been done many years ago. But not licensing or testing banks is totally unfair and unconstitutional. MY TEST: I entered the testing room on December 21 to take the national component developed by NMLSR. I had studied very hard for this test, and I mean INTENSE studying; it was grueling to say the least. I pulled down from the web and printed and studied every regulation, every PDF, every glossary about the mortgage industry I could find, and every mortgage website I could study. If you’ve ever done a Reverse Mortgage you know it’s intense and absorbing and tons of work for the loan officer. Just printing up docs is a lot of paper and work. Keeping up with everything that comes our way from HUD and the Feds is grueling.
Pre-licensing education taught us we needed to know certain things, and when I first saw the 500 page mortgage book it looked overwhelming. Let’s face it; as a Reverse Mortgage Specialist, I hadn’t’ done a forward loan in years. However, the regulations still stand. We needed to know these things anyway. Do let me ask you, how many forward loan officers who are as busy as we ARE actually WENT online or anywhere else and studied every single regulation in their their original format as well as changes to those regulations? Very few. Everyone is too busy working with borrowers, going to their homes, answering phones, sending “great to have met you” letters, running credit reports, printing documents, and in this difficult economy, staying alive. Much of the documents are a lot of lawyer talk and one wonders if HUD wants to impress or truly communicate. Most borrowers just can’t handle it. Much of it sounds like: “It’s THIS way when it’s not THAT way.” Sounds like double-think!
To continue, I knew I needed to pass the national test and pass it the first time. Or I would be relegated to taking it again and paying $92 again! The national course I took cost about $350, the license for New York $299, well, you get the picture. Why spend more if you can pass the first time. Passing first time was my goal. I did pass. However, the test was tricky in parts and those who never originated a forward loan will definitely have trouble with this test — IF they pass at all. My advice is to do your OWN homework. Don’t rely only on your training manual, and if you can take pre-tests and pre-education after you take your pre-licensing course, do it. Know RESPA, TILA inside out. Try to think HOW a regulator thinks! Also, listen to your trainer and the company who put out the training classes. Now, maybe like me, you’ll find you won’t be asked ONE SINGLE question about Reverse Mortgages on the national That’s right! ZIP about Reverse Mortgages. Puzzling. Here is a HUGE industry with TV commercials on every single day, and not ONE question on the national mortgage test?? I also wasn’t asked a thing about H4H, Making Home Affordable, Modification Loans, HMDA, HOEPA, DTI for Fannie Mae, DTI for FHA, the Telemarketing Rule, SAFE, NMLS info, the NEW Appraiser Independence for HVCC, Gramm-Leach-Bliley, and so many other things I killed myself studying. (For those non-mortgage people reading this, don’t worry if you don’t know the acronyms. It would take up too much space to write them out!) There were also no straw buyer questions, no air loan questions, and so on. NMLS does have a “range” of questions, so each person who takes the test isn’t asked the same questions. I was asked some questions about LTV, and questions about RESPA, TILA, etc. Can’t recall now what the questions were, but suffice to say for a person who studied as hard as I did, and it was still tough should tell you something. I can only say I wish everyone the best. NMLSR also does NOT round up the percentages. For example, if on a portion of the test you got 81.92%, you will end up with 81%. The pass/fail rate has improved. 68% are passing as of 12/30. I haven’t checked since. We in the mortgage business have been thrown a barrage of rules, regs, and changes almost all at once. We have been hit hard, and many L/O’s are trying to navigate the changes. Many write loans now with fear and trepidation. We have lost a LOT of control as well as our collective voice. Delays for our borrowers will be the end result of these new regulations. Borrower protection is the goal and a noble one. But much of this does NOT help the borrower!
So what is happening here? Big brother is knocking at our door. In fact, he’s already inside. It’s WE that have let him in without protest. Winston Smith in Orwell’s 1984 had a similar experience when he was confronted with a poster on a wall as he entered Victory Mansions:
“On each landing, opposite the lift-shaft, the poster with the enormous face gazed from the wall. It was one of those pictures which are so contrived that the eyes follow you about when you move. BIG BROTHER IS WATCHING YOU, the caption beneath it ran . . .There was one on the house-front immediately opposite. BIG BROTHER IS WATCHING YOU, the caption said, while the dark eyes looked deep into Winston’s own . . . Winston roused himself and sat up straighter. He let out a belch. The gin was rising from his stomach . . His pen had slid voluptuously over the smooth paper, printing in large neat capitals –
DOWN WITH BIG BROTHER!
DOWN WITH BIG BROTHER!
DOWN WITH BIG BROTHER!
DOWN WITH BIG BROTHER!
DOWN WITH BIG BROTHER!. . . (George Orwell’s 1984 – Part I, Chapter I)
Do I hear an “AMEN!” from anybody??? I rest my case. Until next time!
Kathie Adler - Reverse Mortgage Blog 
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