- The Washington Times - Friday, March 26, 2010

A new federal law, the Secure and Fair Enforcement Mortgage Licensing Act of 2008, requires all mortgage loan originators to take education classes and pass a test by the end of July.

My life has been interesting over the past two weeks. I am in my 18th year of owning a mortgage company; I have personally helped thousands of consumers with their mortgage; and, among other things, I have been writing this column every week since 1996.

Suddenly, I had to go back to school and take a test. With my experience, I thought this would be a breeze. After reviewing the material, however, I realized I would have to put a little work into it.

Despite my modest libertarian leanings, I can say an enforced minimum standard in the mortgage business might a good thing. There are a lot of unethical and unknowledgeable people in this world, and many are in the mortgage business. During the peak of the housing boom, predatory lending became a household term.

I’m happy to say I did fairly well on the test of 100 multiple-choice questions. I received a grade of 88 percent; 75 percent or higher is required. I wasn’t particularly happy with my score at first, until my instructor told me the average score is 71 percent and only about half of first-time test takers achieve the required score.

Some of the material a licensed loan originator needs to know to pass the test is pretty important. A good loan officer should have a very strong knowledge of available mortgage products, underwriting standards, principal and interest calculations, and so forth. A good loan officer wears many hats. This important concept is emphasized in the study material.

Among other things, a good loan officer helps a borrower establish financial objectives. He reviews and explains financial scenarios. He makes appropriate recommendations. He ensures that a borrower is qualified. He explains the application process and all the disclosures that must be signed. He must be aware of the numerous laws so he can abide by them.

Much of this is covered in the study material.

When I sat in front of the computer and began the exam, however, it was pretty clear to me that the test was created by folks who don’t normally sit across the desk from a consumer wishing to refinance or buy a home. Indeed, it was pretty evident to me that the creators of the test were more interested in trickery than judging the student’s knowledge because many of the questions were vague and in my experienced opinion had more than one correct answer.

It will be interesting to see how effective the education and test requirements are in ensuring that the mortgage industry consists only of knowledgeable and ethical professionals. It wouldn’t break my heart to see the bad guys go away.

Henry Savage is president of PMC Mortgage in Alexandria, Va. Reach him at henrysavage@pmcmortgage.com.

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