Mortgage Q&A: Rules squeeze small firms

I got into the mortgage business in 1988, working as a loan officer for a Virginia savings bank. After four years, I resigned, and in 1992, I opened my own mortgage broker company.

Back in the day, a lot of folks in the business warned me my company would fail because mortgage brokers can’t provide certain services, such as “in-house underwriting and closing.”

Those folks also argued that mortgage brokers are required to disclose all their fees to the borrower, while loan officers who work for banks need not disclose their commissions, no matter how excessive.

These warnings didn’t deter me from starting PMC Mortgage. It seemed to me that the physical location of an underwriter was of less importance to closing a deal than the processing of the file. A poorly processed file will have the same underwriting problems if it’s underwritten in-house or in Michigan. Because mortgage brokers are responsible for loan processing, this was something I could control.

Specifically disclosing my fees to my clients is something I have always thought to be the right thing to do. After all, it seems to me the only reason a loan officer would want to hide his fees would be because a client might consider them to be excessive.

Eighteen years later, my company is in the same location, providing mortgage advice and arranging loans through a variety of wholesale lenders. Our mission hasn’t changed.

The industry, on the other hand, has changed a lot. Loose and reckless lending practices encouraged by the federal government, offered by lenders and promoted by brokers are largely responsible for the mortgage mess and credit crunch that exists today.

While there is plenty of blame to go around, it appears to me that large banks are courting politicians to make financial reform unfriendly to the smaller, independent mortgage broker. Maybe I’m paranoid, but consider the following.

Today’s licensing requirements are involved and complex. Let’s take Maryland, for example. For me to originate loans in Maryland, I need the following licenses:

• A company national license.

• A company Maryland license.

• A personal national loan originator’s registration.

• A personal Maryland loan originator’s license.

• Because I don’t live in Maryland or a bordering state, a Maryland company branch license.

While I am a big supporter of weeding out the bad guys in this business, needing five licenses to do business in one state arguably is overkill.

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