GEORGE DOWNEY
Brings ‘accountability’
The Massachusetts Mortgage Association and the Massachusetts Mortgage Bankers Association are joining forces to propose mandatory licensing for mortgage originators in Massachusetts. Leaders of both groups said they would like to pursue the plan through new state legislation.
According to James Dougherty, president and chief executive officer of the MMA, the idea of licensing mortgage originators is one that has been discussed periodically in the past, but because of recent changes in the mortgage industry environment, the proposal has been brought back to the table.
“I brought the subject matter to the [MMA] board of directors three years ago, but there was historical bias that said regulation is inherently not a good thing. However, [the mortgage industry] is being assaulted on a daily basis on what is perceived to be a failure in the industry, for example, predatory lending,” said Dougherty. “However, we can’t establish individual licensing requirements because that is the function of the Legislature. But what we can do, and what we are committed to doing, is to examine the issue of individual licensing jointly between the two associations.”
The unified initiative is still at the beginning phases. And while he said he does not know if the licensing initiative will succeed, Dougherty said both associations have a common goal: establishing greater protections for consumers.
“I don’t know where this thing is leading and we don’t know what the outcome will be, but I can tell you the boards of both associations are interested in doing what they perceive to be the right thing, in the interest of the consumers,” said Dougherty.
While those involved with the initiative say consumer protection is the primary motivator driving the push for licensing requirements for mortgage originators, they also realize that implementing tighter controls and mandating better education and professional conduct for all originators potentially could help the mortgage industry as a whole preserve its reputation by heading off unsavory predatory lending practices. While industry leaders say predatory lending is relatively rare, such activity tarnishes the image of the many reputable mortgage lenders and originators.
George Downey, president of Harbor Mortgage Solutions in Braintree, said the objective of the proposal is to prevent predatory lenders from going from one mortgage company to another undetected, and placing full liability on the individual originator’s actions. It also would be geared toward increasing education for industry practitioners by making continuing education for lenders a mandatory part of holding a license.
“The broad objective is to impose education requirements and testing and continuing education obligations to be able to maintain the license, so if the consumer has a complaint against somebody, that particular licensee is subject to suspension or revocation of their license,” said Downey.
Money Matters
The educational component of licensing could eventually provide an additional association revenue stream.
“The MMA has an education program that we will be providing, and the carving out and defining out an education program is already being addressed. We have an established curriculum of courses based on the [guidelines of the] National Association of Mortgage Brokers. We have their support and we will be drawing on [those resources when] implementing NAMB’s curriculum here. It will create a lot of work for us, but will also create revenue, that is why we have to develop a business plan for this.”
Downey said enforcing licensing regulations would also help combat predatory and abusive lending practices, and require that employers keep up to date with the latest education initiatives and market changes.
“It’s been my way of thinking that one of the problems has been the lack of industry origination accountability. By going in and doing [licensing requirements], it is not a cure-all for predatory and abusive lending, but it is an important step toward resolving the problems,” said Downey.
“We have plenty of rules on the books right now, but they aren’t being adequately enforced. Predatory actions are being done by individuals and that person has no accountability himself … it comes down to the employer. You can’t think of a single personal service provider that is not licensed in the commonwealth – mortgage originators are an exception and the irony is that there is no education requirement, no testing and no competency requirements at all. One can be a shoe salesman one day and a mortgage originator the next day, dealing many times with consumers who are unknowing of the process and are particularly vulnerable to the originator they are dealing with.”
But while the concept seems to make sense on a variety of levels and is likely to garner widespread support, those backing the proposal said it is nevertheless far from certain that the initiative will succeed. And not everyone is convinced that licensing is the answer.
“The holdup, per se, is that there hasn’t been an adequate reception of licensing as a potential cure for the problems that plague the industry today,” said Downey. “Licensing would require people to pass tests and receive fundamental education and be tested … and obligated to get continuing education credit to keep their license. Ignorance and dishonesty are the problems. This will be a no-brainer situation. The only people who will have issues with this are those with their own private agendas.”
Aside from personal agendas and some who may balk at greater personal accountability for originators, the other factor contributing to the backlash of the licensing proposal is money. The state Licensing Division and Division of Bank regulators would require additional funding to oversee licensed originators.
Dougherty acknowledged that licensing for mortgage originators would cost the state, but if it helps to protect the citizens of the state, then the Legislature should find the money to help, he said.
“Anyone who deals with the public, particularly over one of the most important financial decisions they will be making, ought to have financial accountability. Our position is that this should apply to anybody who takes mortgage applications from consumers – a mortgage broker, lender or bank,” said Dougherty. “We are trying to move forward with it, but we don’t know how easy it’s going to be, particularly with the money. That’s a political issue, but if it’s the right thing to do, you find the money.”
Kevin Cuff, executive director of the MMBA, said the two boards are working together to evaluate the best course of action to require licensing among mortgage originators.
“That might end up being a piece of legislation, [or] that might not be,” said Cuff. “An individual licensing requirement is seen as an additional regulatory tool to combat so-called predatory and abusive lending claims that plague the industry today. Licensing will maintain the integrity following that person wherever he goes.”
Dave Hadlock, MMA board member and principal of Hadlock Law Offices in Framingham, said it’s time the state gives money back to the industry that is providing it with revenue.
“This is one of those issues that people are going to have strong opinions on, but overall, if you like the idea of accountability and continuing education” the proposal makes sense, said Hadlock. “At the same time, the last thing the industry wants to do is burden the Division of Banks with additional responsibility in the midst of budget cuts and everything else. But, it seems like the money doesn’t always get allocated back to the area that generates the revenue.”
Regardless of the end result, some mortgage leaders said they are pleased that the two associations, which have not always seen eye to eye, are working together to combat predatory lending, an issue that has plagued the industry during a tumultuous period already filled with challenges. New lenders, new programs, expanded markets and regulations, advances in technology and a prolonged refinance boom have reshaped the mortgage industry into something almost unrecognizable from what it was only a few years ago. The initiative appears to build on the cooperative discussions the two groups held earlier in the year when faced with a legislative push to impose Community Reinvestment Act requirements on the mortgage industry.
“The two associations are working together to try and figure out what can we do promulgate regulation that will solve the problem and devise a business plan that will fund the issues and provide the staffing and education. I doubt it’s going to happen quickly, but it says wonderful things about the industry that the MMA and MMBA are working together,” said Downey. “It’s recognizing there is a weakness in the system that needs to be identified. In a way, we are acknowledging there is a weakness within our own systems – who best knows what needs to be done than the people who are in the business every day. It’s going to make our business more complex and more costly, perhaps, but it’s the right thing to do.”
