LICENSING FOR LOAN OFFICERS BY 2010

Well, it’s a start!!  Finally, effective January 1, 2010, loan originators must pass a test, background check and work for a licensed Banker or Broker.  I hope this will lay the groundwork for more stringent testing and higher standards for what our starting point is. 

Good things about the bill are:  mandatory background check to see if the loan officer has any criminal records, fraudulent history or judgements pending.  It also puts the burden of fraud / mis-doings onto the L.O., not just it’s employer.  It should also eliminate many of the out of state lenders that do business here illegally.

The shortcomings of the bill are:  The bill EXEMPTS institutions at the FEDERAL level.  This is a joke.  It means the loan officers at Wells Fargo, Bank of America, Wachovia etc. do not have to be licensed.  All in all, these direct employees already meet higher screening standards that brokers don’t necessarily have to meet.  I have no issue with these peers.  In fact, most legitimate Federal Bank employees will take the tests and get certified just to have the accreditation.  My objection is that is still gives a green light to the “bulk”banks of the world, all who employ illiterate call-center loan officers, the ones that slam many consumers into products or loans that are unsuitable.  These “call center banks” are all owned by Federal Banks.  

In an ideal world, I’d love to see loan officers bonded, along with having a credit report history that proves the individual is not in financial difficulty.  Too often we see loan officers (along with similar realtors) making a transaction just for the sake of commission, only because they are in such dire need for the commission—at the expense of their client.

THESE DAYS’ WILD MARKET RIDE

The Dow Jones has dropped almost 900 points over the past few weeks.  Our 30 year fixed rates, creeping into the high 6%s just a few weeks ago after the FED basically announced the rate cuts are over, have come back down to the low 6%s.  This is due to investors moving their money from an unstable stock market into our bond and mortgage back security market, which is where we get our mortgage money.  Lots of factors, but one of those factors is the major bank earnings—er, uh, I mean losses.  Until the banks, known as ‘the financials’ in Wall Street talk, stop losing money—the stock market will suffer, house loans will be in short supply, and this will keep our housing market either suppressed, or in further decline.  Ouchie !!!!

FED Meets….Holds Rates Steady!!

The Federal Reserve Board left short-term interest rates unchanged today, ending a ten-month spate of cuts.  Signaling that inflation is now a greater threat to the economy than recession, the “FED” left the benchmark federal funds rate at 2%.   The commercial prime lending rate, a benchmark for millions of business and consumer loans—such as auto loan rates, home equity 2nd mortgages and credit card interest rates—will remain unchanged at 5%.  The Fed voted 9-1 to keep rates the same, the one lone dissenter being Dallas Fed President, Richard Fisher.   I’m surprised the vote was that close, given that three other Fed presidents, most notably the ones from Virginia and San Francisco, openly stated their support to raising rates to stem inflation, just a few weeks ago.  Their comments, along with the same sentiment openly echoed by Fed Chairman Ben Bernanke, was the impetus for consumer interest rates to rise over a quarter % the past couple of weeks.

ILLINOIS FILES SUIT AGAINST COUNTRYWIDE

Remember my rant against the lobbyists (mostly from call-center banks) who are preventing legislation for mortgage licensing?  Well, this is what happens when you incent “call-center L.O.s”, to write loans in volume, with no regard to consumer suitability:

Illinois Attorney General, Lisa Madigan, is suing Countrywide Financial, and CEO Angelo Mozilo, contending that the company and its executives defrauded borrowers in the state by selling them costly and defective loans that quickly went into foreclosure.  Amongst the most damning evidence, were e-mail messages sent to borrowers on their one year anniversary date, stating “Happy Anniversary—home values skyrocketed over the past year.  That means you may have thousands of dollars of home equity to borrow from at rates much lower than most credit cards”.   This created an atmosphere of refinancing the same people, over and over again, with loan costs that were repeated, all while adding to what was owed on the house.  For me, I’m not one who is crying for individual consumers who made bad choices—we’ve all done that one time or another.  But when you read that Countrywide’s call centers closed 60% of their loans on either sub-prime (poor credit) and Hybrid ARMS (negative amortization loans), one who knows this business can see that they were predators to the less educated or vulnerable borrowers.  I have been frustrated  because at one point a lender was calling three different clients of mine who had just closed loans four months earlier.  The problem?? I got them the loans through this particular lender and all 3 clients had a one year pre-pay penalty, due to prior credit issues.  Rather than wait for the one year to pass before putting them in an FHA loan (the plan), the lender tried to refinance them into a similar loan and deceived them into thinking their pre-pay penalty was waived.  It wasn’t.  It was rolled into their $14,000 of closing costs!!  OUCH!!  Now, they are getting sued.  KARMA Lives on!!