Tuesday, January 15, 2013

Real Estate Agent, Realtor, and Consumer Must Know about the Mortgage Industry

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I was meeting with an influential Real Estate Professional the other day at our Club Drive Operations Facility to discuss support of a worthy organization.

What I realized was Real Estate Professionals and consumers know little about the types of Mortgage Companies in Georgia and or the difference in a Licensed Mortgage Originator versus a Registered Mortgage Originator. 

It is important that everyone engaged in the selling and buying of residential housing in Georgia be aware of two important federal laws, The Secure and Fair Enforcement Act, S.A.F.E Act, and Dodd-Frank Act.  The laws were created to protect consumers in mortgage transactions. 

There are fundamental differences in the types of Mortgage Companies that operate in Georgia and the Originators they employ.  These differences may increase risks for Real Estate Agents and consumers.

Most consumers shop mortgages based on rates, closing costs, or a friend’s referral.  In the past, consumers did not worry about the mortgage they were getting because they were told all mortgages were the same and sold by everyone.  The reality was risks were there; however, rising home valuations hid the cracks in loans sold that were only visible once the recession took hold of the economy.  Everyone knows what happened next…..

Now that the financial crisis is mending, all Real Estate Agents and consumers are fully aware of the devastation that mortgages sold the wrong way can create on people and their families.  Education and knowledge is a Real Estate Agent’s and consumer’s best friend in the complex world of mortgage lending.

There are four types of mortgage service providers in Georgia.  Lowest to highest certification and licensing.

Mortgage Broker

Type: Operates as a middle person in the transaction between client and Lender
Loan Recourse: Limited Recourse for mortgages sold
Licensing: Compliant with S.A.F.E Act and Dodd-Frank Act. All Mortgage Originators are licensed with Georgia DBF and NMLS

Mortgage Correspondent Lender

Type: Works on behalf of another Fannie Mae / Freddie Mac seller servicer or a Bank.
Loan Recourse: Recourse for mortgages sold
Licensing: Compliant with S.A.F.E Act and Dodd-Frank Act. All Mortgage Originators are licensed with Georgia DBF and NMLS


Type: Sells various financial products through sales force 
Loan Recourse: Full Recourse for mortgages originated
Licensing: Operates under a Federal Exemption - Mortgage Originators are Registered, not regulated by DBF, do not take the State or National Competency Exams set forth by Washington.

Direct Non-Bank Lender
Southeast Mortgage is Certified in this Category
Type: Certified by Fannie Mae and Freddie Mac, GSEs, as Seller Servicer.  Delegated Unsupervised Title II with HUD.  Can sell direct to GSEs servicing its mortgages.  Specializes in Mortgage Products. 
Loan Recourse: Full Recourse for mortgages originated
Licensing: Compliant with S.A.F.E Act and Dodd-Frank Act. All Mortgage Originators are licensed with Georgia DBF and NMLS

Banks use their Federal Bank Exemption to employ Registered Mortgage Loan Originators.  The S.A.F.E ACT and Dodd-Frank Act were designed to protect consumers.  Once the requirements were unveiled, many Mortgage Originators left Broker and Correspondent companies to work for banks due to their concern over licensing, character / fitness requirements, and financial responsibility.

Brokers, Correspondents, and Direct Non-Bank Lenders like Southeast Mortgage employ State and Federally Licensed Mortgage Loan Originators that comply with S.A.F.E ACT and Dodd-Frank Act requirements regarding standards for character / fitness, and financial responsibility.

Understanding your mortgage service provider is important for the following reasons:

1.   Working with a Licensed Mortgage Originator is a protection set forth by your government.  Would you buy stock from a non licensed stock broker?  Licensed Mortgage Originators are individually licensed and passed State and Federal competency tests.

2.   Choose a mortgage company that has good operational controls and separates the sales and processing functions.  Why?  This ensures what you put on a mortgage application is verified independently.  If the application is not handled properly, the applicant could have their loan called for reasons unknown to them.  This scenario can cause credit score issues, legal bills, and jeopardize the applicant’s home.

3.   Realtors: Happy Client = More Referrals.  If something goes wrong after the closing, who will the client blame?  Use licensed Mortgage Loan Originators and protect your clients while reducing risk to your referral base.

The mortgage industry has changed.  Consumers are now aware of the importance of getting the right mortgage.  It is not just a mortgage; it protects your family and personal finances.  Real Estate Agents rely on referrals and great service.

Choose your mortgage company based on who employs Licensed Mortgage Originators.  Ensure they focus on the right mortgage suited to your particular needs.  This will eliminate risks to your family’s home and financial security after the closing.

The Consumer Financial Protection Bureau (CFPB) is currently looking into ensuring all Mortgage Originators are held to the same standard and eliminate the differences noted above.
Cal Haupt
President and Chief Executive Officer
Southeast Mortgage of Georgia, Inc.
Serving our client's trust since 1993


Laura Gray said...

Good blog that is well written. However, I did have one comment about the difference between a registered mortgage originator and a licensed mortgage originator. I happen to be registered because I work for a bank and am not required to take the state test. Working for a bank, though, requires that I take and pass tests that are equivalent to the state tests. They are approved by the FDIC and our regulatory agencies and administered by a company hired by the bank. Not only are we well versed on mortgage compliance, we are trained and tested on bank products that could assist and benefit our mortgage clients. Having been in banking for 30+ years and originating mortgages for 16 years, I feel like I'm as knowledgeable and compliant of industry standards as someone who has taken and passed the state test. I welcome the day we have to take it to eliminate this kind of bias and commentary. I do agree with you that this isn't the case with all originators, but feel it is prevelant among bank originators.

Southeast Mortgage of Georgia, Inc. said...

I share a similar background running a 3 billion dollar Atlanta Bank. I went through this with Insurance Sales at a Bank and Mutual Fund Sales. I think there are a lot of good bankers and mortgage professionals in Banks. My point is all Mortgage Professionals should pass the competency tests set forth by law. Equivalent is not the same as the federal test. Even if Southeast Mortgage could operate under an exemption, I would still license to ensure the people get what their representatives in Washington passed as law. Good commentary and a fair. Thank you for following our Blog. Cal Haupt