Like beauty, ethics is in the eye of the beholder. In other words, what's ethical for one person may be unethical for another.
So, what's a mortgage loan originator to do when he discovers that one of the trade lines in an applicant's credit report actually belongs to a relative with a very similar name? Better yet, what's the originator to do when the trade line is a good one with a long history of paying on time and a low balance-to-limit ratio.
Those questions were put to a continuing education class at the recent Florida Association of Mortgage Professionals' annual conference in Tampa, Fla. And to complicate the matter even more, the students were told that while the applicant could comfortably afford the anticipated loan payments and had a good debt-to-income ratio, the credit score could fall below what was needed to obtain the mortgage if the miscue was corrected.
As might be expected, the discussion was lively, bordering on boisterous, in fact. Some thought the originator should tell the client to fix the error and leave it at that. Others thought it was the originator's obligation to notify the credit reporting agency, and a handful even believed they had no responsibility to act one way or the other.
The consensus, though, was that it was enough for the originator to tell the client to contact the lender and credit agency to have the account removed from the client's file. Doing anything more, it was said, would hurt the client and kill the deal.
But the class instructor, Fred McDowell, a title consultant from Lake Worth, said that wasn't enough—not only did originators have an ethical responsibility here, they had a legal one.
"This is a no-win situation," McDowell told his students. "If you knew of the mistake and submitted the application anyway, you have committed mortgage fraud, and you'll probably have more visitors for dinner than you ever wanted for the next two years or so. You may have the best of intentions, but you've committed a crime."
The case study was one of several discussed long and loudly during the two-hour course, "Ethical Solutions for Solving the Credit Scoring Puzzle." But it was far from the only session during the three-day conference where fraud was the topic.
At a lunch with Florida's key mortgage regulators, Andrew Grosmaire, chief of the Bureau of Enforcement in the Office of Financial Regulation's consumer finance division, warned licensees not to allow someone else to use their NMLS number when originating a loan.
Sounds like common sense, but it happens and it happens frequently, Grosmaire told the crowd. And "it's a bad thing," the state official said.
"The issue is greater on you than the other person," he warned. "You went through a lot to get your license. If you let someone else use it, then you're not a professional."
On the same topic, Grosmaire also said it is incumbent on brokerage owners and managers to verify that the originator holds a valid, current license "before you take a single piece of paper" for him.
