Lenders Must Pass Exams

It should be no surprise that the collapse of the housing market drew the attention of regulators to professionalize the lending industry. Let me go on record as saying that this is not a bad thing for the consumer. Like Wyatt Earp cleaning up the streets of Tombstone, the government has created new requirements to ensure that the lender you choose is qualified and to force out lenders who were incompetent, dishonest or both.

New Requirements

The new requirements entail education, testing and criminal background checks that must be completed by the end of June and each loan officer will have an individual number that will follow them throughout their career. This will be monitored by the National Mortgage Licensing System and will allow for tracking of complaints, defaulted loans and other important statistics. Those loan originators that do not adhere to the law can have their licenses revoked.

Requirements for Larger Financial Institutions

Large financial institutions, such as banks, and their loan officers are exempt from the requirement. This exemption can be good and bad at the same time. The loan officers from these institutions do fall under the larger regulatory umbrella of the bank and the institution is responsible for ensuring that their originators receive the ethics, loan and compliance training, as well that their employees are of the moral fiber necessary to do their job. This should give some solace to you, as these entities need to meet banking compliance requirements of which mortgages are subset.  But without seeing the NMLS number, however, you have no guarantees as to the specific training or as to the background of the individual with whom you are dealing.

Look for the NMLS Number

I bring this to your attention now, because you should be vigilant to make sure that your lender is qualified to service you and your needs. As of the time I am writing this post, the overall pass rate for existing mortgage loan originators was roughly 67%, so you can see how important this is to make sure yours lender is qualified. If you decide to go with a bank, you have the good faith of the institution that all of their employees are compliant. If you go with a mortgage banker or broker, you need to look for their NMLS number. It is required on all advertising and official correspondence with you.  For example, I put mine in my signature block to make it easy for my clients to see. If you do not see it or your lender dodges your questions regarding their licensing, I recommend looking for a different lender.

Thank you to [j]t’s for the photo, which he graciously offered via the Creative Commons License.