Ethical Requirements For Mortgage Brokers

The NY Times has just written an article addressing ethics and mortgage brokers . . .

Ethics Standards for Brokers
The New York Times

By BOB TEDESCHI
Published: November 2, 2007
MORTGAGE brokers, who have borne much of the blame in recent months for the subprime mortgage crisis, are now trying reassure borrowers that they are worthy of trust.

The National Association of Mortgage Brokers, which has more than 26,000 members, roughly 20 percent of the nation’s brokers, is introducing new professional standards, which take effect today, as well as a complaint process for aggrieved borrowers.

“This was done more for consumers than brokers,” said George Hanzimanolis, the association’s president. “It’s so hard to identify an honest mortgage originator — and every state is different when it comes to licensing requirements — that we realized there was a need for some kind of benchmark by which lenders could be identified.”

That benchmark will take the form of the brokers’ association’s Lending Integrity Seal of Approval, represented by the image of a house with a check mark superimposed on it, and the words “lending integrity” below.
To earn the seal, members must pass criminal background checks, complete annual continuing education classes on ethics and other industry issues, and meet the association’s code of ethics.

Borrowers may bring complaints to the association about loans made either before or after the new program was put in place. The group’s ethics committee will review the complaints, and if brokers are found to have violated the ethics policies, they will lose their membership in the association and their right to use the seal of approval.

The criminal background check will be nationwide, but Mr. Hanzimanolis said that the association had not yet determined what offenses it would consider serious enough to ban members. As part of the licensing requirements, some states, like Kentucky, bar brokers who have had a felony conviction in the previous five-year period and any convictions at all involving fraud.
But the association’s new standards are stricter than those of some states, even some that have in recent years made it more difficult to obtain licenses to sell mortgages.

New York, for instance, passed a law last year requiring mortgage brokers to complete continuing education courses on ethics, among other things, and to inform the state of any past legal actions taken against them.
Meanwhile, the Conference of State Banking Supervisors, a nonprofit industry group, is building a repository of the names of all licensed mortgage officers and details of any legal actions taken against them, so that regulators and prospective employers can track anyone who has victimized borrowers in the past.

Because borrowers typically do not consider complaining to industry associations when they are wronged, Mr. Hanzimanolis said, the association has struck agreements with state banking departments to share consumer complaints against brokers.
Alan Rosenbaum, president of the GuardHill Financial Corporation, a mortgage brokerage company in Manhattan, said that the new National Association of Mortgage Brokers program would be valuable. “I’m all for it,” he said. “Anything to bring up the quality, professionalism and reputation of our industry is a good step.”

Mr. Rosenbaum, who is not a member of the association, said he would consider joining so that he could display the seal of approval. “If it would distinguish my firm from others, it’d be worth it,” he said. “Borrowers don’t know a good mortgage broker from a bad one.”

Source