The past two years have brought devastation to the real estate industry and the economy as a whole, partly due to the abusive playground on the mortgage world. As the country still reels from the mess of depreciating house values and foreclosures, the Administration and Industry are busily trying to set up new processes and programs moving forward. This may stop, or at least help, the real estate industry from turning the world economy upside down again in the future. Though, we are known to forget the past when things get better again.

Still, mortgage programs have become harder to qualify for, banks are required to have more skin in the game, mortgage insurance is harder to get and the salespeople in the industry need to be more responsible for their actions. In other words, if everyone wants a piece of the pie, then they better be willing to jump into the oven?

Part of the overall plan is to create a new and improved mortgage loan officer. These new loan officers will be lean and mean and in it for the long haul. In other words, it will now be a profession consisting of people that want to be professionals not just looking for a bundle of cash only to hit the road again.  The government and mortgage industry have collaborated on a new project to great this better mortgage loan officer with stronger backbones and more transparency. The program should be smoothly run by January, 2011 and become the new norm.  Here a few of the details they have been fine-tuning:

1.    All mortgage loan officers (MLO) need to be registered and licensed with their state banking department which then reports to a central federally related industry (NMLS). In order to be accepted, the MLO needs to pass certain standards such as no criminal charges of fraud, personal financial stability and affiliation with only one licensed mortgage company among other criteria.

2.    A loan officer needs to have 20 hours of industry related education and pass a (really hard) test before then can actively work in the industry. They also need to take continuing education courses each year, on federal and state specific laws and guidelines.

3.    All mortgage loan officers need to be bonded (insured) in case of any personal wrongdoing. This insures the consumer will be covered in case of civil action of wrongdoing.

4.    All loan officers’ previous and current employment and licensing information is posted on a web site for clients to view.  Go to www.nmlsconsumeraccess.org to see any loan officer. If they are not listed, then they are not licensed.

5.    The compensation for all mortgage loan officers will be capped in April of 2011. Regulations are changing to require that a loan officer may not be paid based on the interest rate they offer to the consumer, the mortgage program or any bank incentives offered to them. They may also not charge points to the client if they are being paid by the lender. These details are being worked out and will become the new industry standard of compensation.

In essence, these restrictions are trying to create a better loan officer, one that actually took the steps to join the profession and continues to maintain their status. There are now thousands of dollars in fees imposed on the individual for this registration, education and insurance. Many companies will not pay for the costs for their employees and they have to lay out the money themselves. This makes a person decide if they really want to enter the industry and not just on a whim. The fact that the compensation is being capped across the board is good to control greed, but not to force the best professionals to leave the industry all together. WE can only hope for proper thinking to come here.

Again, this is another case of trial and error to fix a big problem-another big problem that this administration has been faced with. Unfortunately this came too late to avoid the damages we see now, but hopefully never too late to stop it again. One final thought- although there is great credence places on the poor practices of the mortgage industry, there will always be the personal responsibility of the consumer in the forefront of each home purchased and finance. Lend responsibly-borrower responsibly!