Thanks to overzealous regulations, you, the regulators, have planted a time bomb that will explode with    an annihilative force that will eradicate the reverse mortgage industry and perhaps the forward mortgage industry as well. 

The enemy of the people was not the mortgage bankers, mortgage brokers and FDIC Banks, who sold those liar loans that went bad. If truth be told, they were just complying with the demands of the secondary market. It was the unbridled greed of the secondary market s that created the imbecilic, maniacal mania that led to the “get your loan now” stampede.

People knew the old rules of the game. In order to get a mortgage, one had to earn that right. In other words, one had to meet the tried and true underwriting criteria as promulgated by Fannie Mae/Freddie Mac.  Then in 2002, this criterion was ditched in favor of a more generous one that demolished any and all barriers to the mortgage market.  And the regulators looked the other way.

During this free for all, if you were a potential borrower in need of that heretofore elusive equity, you were portrayed as a fool, if you did not take this opportunity to help yourself and your family. It was difficult to be the lone “village idiot holdout” who said “no thank you”, when the pundits were saying real estate values never go down. Let’s face it; this time became the time to take advantage of the mortgage market. Millions of people joined in. Imagine, it was like the drug addict being offered cocaine…and it was O.K.to partake. 

After the mortgage debacle, the search began in earnest for the scapegoats. Naturally the clues led to the entities with the smallest lobbying dollars.  There was no way that the blame for the implosion was going to be placed at their doorsteps. Those damn mortgage brokers/bankers. If it was not for them, we would not have had a mortgage market implosion, the thinking goes.  And the SAFE Act was passed by Congress.

I have met my share of politicians. One on one they are a very hard working, caring group of people. However, the FDIC banks have snookered Congress into thinking that they, the banks, do not need to have their loan officers subject to the licensing, continuing education & testing requirements of the SAFE Act. The test is so rigorous that the passing rate is about 50%. The unintended consequence of this is that the mortgage banker/broker component of the mortgage industry will be decimated.  Well maybe it was not an unintended consequence. If an individual wants to become a loan officer, they would choose a FDIC bank over a broker or a banker because no courses or testing is then required.

But I will tell you this, for my money a broker/banker is a thousand times more knowledgeable than a loan officer working for a FDIC bank. In fact, the SAFE ACT is being undermined by these banks. Whether a borrower goes to a FDIC bank or to a mortgage broker/banker for a loan, the same rules and laws apply. The banker/broker through the continuing education courses and the tests that are required to be taken know the rules and the laws like the back of their hands. The loan officers working for the FDIC banks know they are immune from these requirements. That is about all they know. It is impossible for banks to individually teach their loan officers what all others must comprehend.

The government cannot bring confidence to the mortgage industry unless all such originators are subject to the SAFE ACT. Therefore the registration of loan officers should be repealed and replaced with the same licensing requirements that are required of the brokers/bankers.