Let me start by disclosing that we are mortgage brokers. So there is inherent bias involved here. It’s also important to note however that we’ve had plenty of chances to leave the ranks of brokers and join that of mortgage bankers, which in the mind of many, at least at the governmental level, is the more advanced breed. Perhaps they are, who knows; but I will share with you an interesting irony regarding the mortgage loan officer (MLO) who is, or works for, a broker vs. the MLO who works for a bank.
A few years ago when the housing market began to implode and blame for the implosion began to be handed out, much of said blame was fired at mortgage brokers. While there was certainly some blame on the part of mortgage brokers, they were not the ones responsible for the creation of the exotic loan programs that dominated the lending landscape; nor were they responsible for the underwriting or funding of those mortgages. None-the-less, it was thought that a MLO working for a bank was less “risky” than one working for a brokerage.
So, when the SAFEAct (the law requiring mortgage loan officers to become licensed that became effective in the latter part of 2010) was implemented, it only required MLO’s working as or for a broker to be fully licensed; while a MLO working for a bank simply had to “register” with the licensing system (known as the NMLS). Registering meant they didn’t have to go through all the same background checks or testing.
Here’s where the irony comes in: the mortgage brokerage side of the industry certainly had it’s share of bad apples, but the vast majority of broker based MLO’s were (and those that are left still are) folks who care about their clients and about providing an important service and doing it exceptionally well and with uncompromising integrity. So when the licensing requirement came along, most of the brokers (the good ones) jumped in and took care of getting licensed. In fact, though they may not have agreed with all of the elements of the licensing process (such as fees that, in our case, increased from $50/year to over $1,000/year), they saw the value in the licensing requirement.
But, guess what, the bad apples saw a great opportunity. Remember the banks, those bastions of integrity and performance. Well, they provided the perfect solution for the bad apples from the brokerage industry. Since bank MLO’s didn’t have to be licensed, they tidied up their resumes and headed for the banks, which is where many of them are camped out now.
Of course there are plenty of very good MLO’s working at banks, but the irony in the fact that those most likely to have caused the problems in brokerages were able to simply move over to banks because of the very licensing system that was designed to monitor and deter them as brokers is humorous at best. Just remember this when deciding whether you’d be better served by a small local broker or a big national bank when you go to get your next mortgage.