Among the few states that can be seen to be a bellwether for the mortgage broker industry as a whole is Florida.
The state has been among the leaders in passing regulations that affect the industry, including one of the earliest continuing education requirements.
Furthermore, the group now known as the Florida Association of Mortgage Professionals is older than the National Association of Mortgage Brokers, and was instrumental in the nationwide group’s founding (FAMP was created in 1960 and NAMB in 1973).
However, in recent years, FAMP had a falling out with NAMB and discontinued its affiliation over the reciprocity issue (all FAMP members have to belong to NAMB as well) and a dues increase at a time when its membership was already hurting financially.
At the time of ON’s discussion with FAMP officers, among the topics was a possible reconciliation with NAMB now that reciprocity was off the table.
The group also discussed the national broker test, comparing it to the SAT. While those in the industry for a long time do have some residual knowledge from their experience, study and preparation is still needed to have a better chance of passing.
The panel also expressed concerns regarding what will be the ultimate effect of the financial reform bill on the mortgage broker industry, with one panelist commenting there is still the opportunity to do business.
FAMP current president Richard Peek Jr., immediate past president Valerie Saunders and president-elect Jon Turla met with ON’s senior housing correspondent Lew Sichelman at the group’s recent annual meeting in Orlando.
ON: In your heyday, this group had how many members?
SAUNDERS: I think the highest we ever got was 4,200.
ON: How many do you have now?
SAUNDERS: Approximately 1,500.
ON: Is it holding steady now?
SAUNDERS: It’s been holding steady between 1,500 and 1,800 over the past couple of years.
ON: No signs of it going back up?
SAUNDERS: You never know, as the industry evolves and changes there is always the potential for increased membership. Hopefully if FAMP and NAMB can come to an agreement and we can begin to better serve our members on a federal level as far as legislatively, that will increase membership as well.
PEEK: Also with the change as far as loan originators are concerned from a licensing perspective. And then our change as far as the name (of the organization) is concerned to “mortgage professionals,” it opens up other avenues as far as potential members are concerned. There are signs our membership could increase. We have seen an increase in membership just based on the convention. We have more exhibitors at the trade show, we have more lenders exhibiting at the trade show. There were really no lenders participating in the trade show and this year I think we have 10 or 15.
ON: Does that mean there is more interest in wholesaling?
PEEK: It means there is more interest from the people who are providing the products and services we need in order to be able to originate loans. That is a positive. It is a very good sign. That, coupled with our education offerings. We knew coming into this convention that education was going to be the driving force of it. We had planned six to eight months ago to have a focus on education due to the fact we are transitioning, as far as the state is concerned. We didn’t enter into any type of agreement but we coupled our convention with Mortgage Revolution, which is a group out of Atlanta, to allow them to have an event which coincided with the state convention and tradeshow.
SAUNDERS: Our group is more focused on education, as far as what is required on a state and federal level. Because we cannot have marketing courses approved as NMLS classes, it doesn’t make sense for our association to use our limited resources to create marketing courses for our membership. However, partnering with Mortgage Revolution, a group whose only focus is on helping build a better originator through different types of marketing and thinking about the box concepts, it made sense for the two groups to come together.
ON: So from the things you are telling me, most people would take it as an indication brokers are not going to roll over and play dead. They are not going to go away.
PEEK: I don’t think the broker has a need to roll over and play dead at this point. It’s always been assumed that the third-party channels are some of the most profitable channels as far the big four banks [are concerned]. And I think if you look at their numbers from a cost perspective, the broker channel is probably the most profitable. Given the additional scrutiny that are being put on loans right now, the risk as far as those loans are concerned has to be dramatically decreased. So I think the broker has a great opportunity to continue to expand. It is going to require change. You are not going to do it the same way you used to do it, there are additional rules and regulations that you must follow. But those that have a desire and can adjust and will survive and thrive, I believe.
ON: Is there a role for mortgage brokers going forward?
SAUNDERS: Obviously. When you look at what makes good business sense, and just from an economic perspective, it makes more sense for a large mortgage company to want to continue to offer wholesale products because brokers enable them to have lower overhead. Brokers were created in order to alleviate the need to have a lender open up storefronts all over town. It was more cost effective to do business with somebody that was taking over that overhead and giving them loans, but letting them still make the credit decisions. So I don’t think that scenario will go away. If anything, I think that wholesale will become much more popular than it is now. I don’t know if it will be as popular as it was five years ago.
TURLA: As far as brokers going forth, the availability to the consumer is greatly expanded. It is easier for them to touch different financial institutions, all through one person, instead of having to physically go to the different people; one broker can shop for them.
ON: In one of the sessions here, it was said that not only is the broker channel more profitable, it has also been proven it has the safest loans. On top of the additional scrutiny, it has got to be a win-win situation?
SAUNDERS: If you look just from a licensing perspective, you have an entity that is going to pull state and federal background checks, pull credit reports. You have individuals taking national and state exams, doing a minimum of 20 hours prelicensing education and then doing education, background checks and credit reports on an annual basis. Quite honestly, if I was a consumer I think I would want to go the individual that goes above and beyond towards their profession as opposed to calling on somebody at a bank that barely did one-third of what a loan originator did in order to get a license. It is a great marketing tool.
ON: Will you be using it?
TURLA: Basically yes. Having to go through many steps to obtain and keep a license, I consider myself a professional as far as being able to guide the consumer into the correct loan for the financial situation that they have. I have seen both parts of the world, as far as banking and being a broker, and the difference being sometimes the person taking the applicant’s information in a bank is just an information gatherer and they don’t know how to talk to the consumer and maybe tell them no they can’t buy a home when there are actually ways to help them with their situation, to get a home in the future.
PEEK: I have heard that there are certain institutions now that when you go in to apply for a mortgage loan, when you go into one of the retail banking branches, they point you to a computer terminal and tell you to input your information into that computer terminal and somebody from wherever—the United States, Taiwan, wherever it may be— will get in touch with you in regards to your request for mortgage financing. I don’t you’re going to get to a point where those individual consumers don’t want the face-to-face, that person there who can answer their questions and respond to their needs.
ON: This is a high touch, despite all the originations they say go on online.
PEEK: Very much so.
SAUNDERS: The other thing is, it is not just what happens during the process of the transaction, it is what happens when the transaction’s over. When that transaction is over, that computer or person on the other end goes away because they are moving on to the next loan. But if you are dealing with a loan originator whose business is in your community and you have a problem after your loan has closed, you have an immediate resource to go to. You are dealing with the same person you dealt with throughout the process. Even if you have the simplest of questions.
ON: A mortgage broker is a not only an origination friend, it is a servicing friend?
SAUNDERS: Exactly.
TURLA: And also very convenient for the consumer. I don’t how many loan officers at financial institutions are willing to talk to the consumer during the evening when they are off from work, at [the consumer’s] place of business—because we can meet mobile with laptops—or even during weekends. So it makes a huge difference in making the consumer feel very comfortable and stress-free.
ON: How is Florida adjusting to the SAFE Act and its licensing and registration requirements?
SAUNDERS: It is a little too soon to say. Today (July 8) is the deadline for unlicensed loan originators and unlicensed processors and contract processors and in-house underwriters to apply for their individual mortgage broker’s license. What they are having to do is to obtain the current Florida mortgage broker’s license by Sept. 30 then apply for the new loan originator by Dec. 31. The current mortgage broker license will allow them to continue to work until they have been approved or denied for the new license. So we’re just reaching the first deadline. We are going through a proposed rule making process establishing adverse credit history information as far as how the pulling of credit reports and viewing if somebody is financially fit will be handled starting in October.
ON: From a reporter’s point of view, the fail numbers on the NMLS test are very high, especially among people who are already in the business.
SAUNDERS: But I think you know why it is like that. If you’ve been in the business 20 years, you are thinking of the business. I do loans every day. But you probably can’t rattle off when RESPA was ratified. Or you can’t remember the difference between Reg B, Reg Z and Reg X. That is not something you deal with on a daily basis.
TURLA: We might not know when things were ratified or what section of the law, but we use it almost every day because we’re regulated by it.
SAUNDERS: You are not using it, you are complying with it, without knowing the background history of why you are doing it.
ON: What does having a question like when was RESPA ratified prove if someone is a good, honest, ethical mortgage broker? Yet the people at NMLS say they believe their tests are structured to be fair. Do you have a problem with the test itself?
SAUNDERS: You have to realize when Congress approved the SAFE Act, they said it has to include federal law, state law, rules and regulations, consumer protection and fair housing. Federal law is a pretty broad term. To try and take a term like that and create a test question around it, your first thing is going to go to the history. Then you are going to go to the implementation and then you are going to go to practical use. With a bank of 6,000 questions, I don’t think it is crazy to have a question “What is Reg X?” “What is Reg Z?” Most people don’t think of Reg Z is TILA and most people don’t think about the history. But it doesn’t mean it is not something that could be useful. If you are going to explain something to someone, I don’t think there is anything wrong in knowing the history of why you have to do it.
