Trade Groups Differ Over Originator Licensing

The Mortgage Association of Minnesota introduced the new designation, called the Minnesota Mortgage Professional, at its annual convention in Minneapolis earlier this month when it also certified 18 loan officers with the title, the trade group’s managing director Eric Ewald told MortgageDaily.com.

Among the designation requirements are that loan officers acquire training and education points by taking specific courses and that they have at least two years of experience, according to Ewald. The program was implemented to promote and strengthen professionalism in the industry.

“It’s a way of, at the individual level, recognizing a commitment to professionalism,” the director said. “It demonstrates that individual’s experience and commitment to ongoing training and education.”

But, the organization has much work ahead of them as their ultimate goals are to have every originator in Minnesota familiar with the designation, and for the public to be able to recognize it as well, he added. “They’ll know that the loan officer has training above and beyond what their employer gives them,” and that should give prospective borrowers more confidence and trust in the loan process.

The new designation comes as the mortgage industry has experienced large origination volumes requiring the hiring of many new loan officers, and as more consumers face predatory lending — it is reportedly one of industry’s biggest problems this year. Fraud is also an ongoing subject.

Minnesota was among the states with the highest level of suspected fraud activity in early 2003, according to the Fraud Index by sysDome.

The Minnesota Attorney General recently took on an investigation that involved a scam operator claiming to be an agent of the St. Paul Foundation. The scammer allegedly led minority residents in Minneapolis to believe the foundation had hundreds of thousands of dollars in grant money available for home ownership, and that he could get them money for their purchases in exchange that they pay a $500 fee and attend a seminar.

In late 2003, the Minnesota Attorney General’s Office announced that it filed a consumer fraud lawsuit against Genesis Consulting Group, Inc. and its president for allegedly misrepresenting the terms and costs of financing programs to consumers with poor credit histories. Genesis offered a “sweat equity” program, in which it would allegedly tell the consumers they were pre-approved at a particular monthly payment and interest rate. The consumers would often sign a purchase agreement, and then invest their time building a home and money buying materials for the structure, believing the home would be theirs. Once the homes were built, the consumers were told that because of their poor credit the financing supposedly fell through, but the consumers were never pre-approved or in some cases an application was never even submitted to a mortgage lender on their behalf, according to the announcement.

Minnesota law requires that mortgage origination company owners hold a license in order to operate their business, but does not require individual loan officers to be licensed, Ewald said. The licensed companies are regulated by the state’s department of commerce, which can revoke the license of or impose fines on these companies if their loan officers violate laws and regulations.

The state’s philosophy is that those in charge of running the licensed mortgage company are responsible for their employees’ actions and therefore must ensure they are trained and educated enough to comply with state laws, Ewald said — adding that the association supports the state’s position on this matter.

The Mortgage Association’s designation follows another rolled out by the Minnesota Association of Mortgage Brokers Inc. In 1999, the broker group developed the Minnesota Mortgage Specialist designation in response to the need for a tool to increase the level of education and professionalism of individual mortgage industry practitioners, said president of the broker group Wade Abed. It also requires a minimum of two years experience and annual participation in continuing education in industry law and ethics. Currently, 37 individuals have received the designation.

Abed said the broker organization believes the licensing of individuals is necessary because loan officers are the people who directly work with consumers to make loan arrangements. Such a requirement would help protect consumers and raise industry professionalism. Therefore, the brokers’ association has urged the state legislature to consider it, and annually lobbies at the capitol to educate legislators about the benefits of individual licensing, he added.

While the brokers introduced a legislative piece for the state to license individuals, Ewald said his organization believes doing so would take away responsibility from the company and hold the state responsible.

Ewald added that the broker association’s bill was good in so far as it called for loan officers to undergo background checks, as well as educational and training requirements, which he thinks is important. But, the Mortgage Association did not support or oppose the brokers’ legislative piece because it believes “the industry should raise the bar for its own members,” not the state. No legislature is currently pending that will change the state’s current licensing standing, he said.

The Legislature has adjourned for the year, but the brokers plan to continue promoting responsibility and professionalism in future sessions, Abed said.