At a time when Massachusetts is reeling from thousands of job cuts, the state is getting ready to force hundreds more, as it slices the livelihood out from under scores of mortgage originators.
Under new rules at the Mass. Division of Banks, originators whose credit history doesn’t meet certain benchmarks will be denied a lending license. It’s part of an attempt by regulators to clean up the mortgage lending business, but it’s one part that seems to have missed its mark.
While the Division is rightfully concerned that consumers be protected in the mortgage process, its focus ought more rightly be on the regulation and financial stability of mortgage companies and brokerages, not the individual originators. It’s instructive to see that’s exactly the tack the Division takes when it comes to mortgage lending through banks: the Division regulates the banks, and in turn it is the banks’ responsibility to manage their lending officers.
The credit criteria is knocking out hundreds of mortgage originators from earning a living. Were the commonwealth attempting to impose the same strictures on, say, real estate sales professionals, the political furor would be overwhelming. Being late on a few credit card payments shouldn’t be a black ball for being in the home sales industry.
The reasoning for the rule seems to be that, if someone is saddled with debt, they are more likely to be tempted to steer consumers to loan products that produce the highest yield for the originator, but perhaps aren’t in the best interest of the consumer. That seems a lightweight argument. In debt or out, salespeople seek high commissions. Whether they act ethically and honorably is a function of character and oversight, not finance.
What seems particularly galling is that, while Gov. Deval Patrick has worked to loosen rules regarding the consideration of felony convictions in hiring decisions, his administration is knocking people out of jobs because of their credit record. A poor history of being a burglar, assailant or embezzler sure seems more alarming than being late on the electric bill.
Hardworking people are being unjustly jettisoned from their jobs. Listen, for example, to John Mercauto, at Mortgage Funding Corp. in Hanover.
“This law is terribly unfair, and how do the originators clear up their credit while out of work, how do they take care of their family?” he wonders. “Maybe they clear up their credit issues by applying for unemployment, food stamps and medical care from the commonwealth.”
Mercauto says he is losing three loan officers, two who are going through nasty divorce proceedings, but who chose to keep payments flowing for child support while falling behind on other credit obligations. One has problems with his credit cards, but is resolving those situations with his lenders. Are those valid reasons to put the mortgage originators out of work?
The Division of Banks asserts that people who have been denied have recourse – they can appeal to state Superior Court. But it seems cruel to tell people denied because of poor credit that they need to hire lawyers to get their livelihood back.
There is time for the Division of Banks to change its stance. It needs to protect consumers, but this is not a consumer protection measure. It’s a punishment for poor credit – ironically at a time when, faced with banks that have mismanaged their finances, our answer is to give them billions of dollars, not shut them down.
