Not too long ago a rumor was making the rounds that a top 10 ranked lender—a megabank you might say—was asking some of its retail loan officers to sign an agreement where they would promise not to get licensed with any states. The reasoning went like this: the bank didn’t want to lose any of its top performers.
As for what the LO received in return, I’m not sure, except for maybe job security and a “little extra something” in their paycheck. From what I’ve been told this large bank put the “no license” language in the contract of its loan officers.
Admittedly, I have no idea if residential LOs working for all depositories actually sign a binding contract or if they are employed at will. Some lenders have contract employees—and some do not. (The bank in question promised to get back to me, but at deadline had not.)
I ran the scenario by a dozen mortgage professionals I trust and half said they’d heard similar stories while the other half said it sounded, well, a bit crazy. One mortgage vet who’s based in Florida told me this: “In the 1980s I left my mortgage company to work at Citibank. I had my Florida mortgage broker license. Citi made all of its new hires, including me, surrender their broker licenses.”
Then again, in today’s mortgage market, job security is quite important. Many LOs I talk to are having a great year, even better than last year which was decent. The
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But let’s be clear: getting licensed is a cost of doing business and it comes out of someone’s pocket. Banks, of course, can argue they have all sorts of regulations to deal with already and being a depository in the era of Dodd-Frank is no cake walk.
I would guess that because bank lobbyists are good at what they do, they wrangled a mortgage exemption for their LOs during the zillions of hours of debate that went into Dodd-Frank.
Even though Savitt and others contend there’s a silver lining (of sorts) with the licensing issue, there is no true parity between the two LO types. Stated differently: brokers are upset their income has to be disclosed to the consumer while the bank LO gets a pass.
“If I’m a broker, the $1,500 I made on that $100,000 mortgage is there in print for the consumer to see,” said one mortgage banking trade group official, requesting anonymity. “But the $3,000 that the Wells employee is making is not disclosed.”
This official, who’s talked to the CFPB about its LO comp rules, believes that in time the agency might level the playing field. “I think they’re trying to get it right,” the official said.
Meanwhile, Don Frommeyer, president of the National Association of Mortgage Brokers, is hopeful about one issue tied to LOs: licensing. Frommeyer, senior vice president for Amtrust Mortgage in Indiana, said he’s heard the stories about certain banks not wanting their originators to get licensed. “They’re worried that they’ll lose these employees,” he told me. “They also don’t want to pay for the testing.” Frommeyer recalls a time (pre-crisis) when entire production teams would walk out the door because they received a better offer across the street. In today’s operating environment bank LOs cannot move easily—unless they have a license.
Frommeyer believes it’s just a matter of time before the CFPB levels the playing field—on licensing. As for compensation disclosures, that’s a different nut to crack.
