This is a post I wrote about six months ago which I felt the need to update. Rather than rewrite it, I thought I would practice my editing skills. So, eliminations are crossed out and additions are in red.

The past two three plus 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 continues to reels from the mess of depreciating house values and foreclosures, the Administration and mortgage industry are still 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 even harder to qualify for, banks are required to have more skin in the game, mortgage insurance is harder almost impossible 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- or now I think less loan officers. These new remaining 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 (but turns out not to be) smoothly run by January, 2011 and become the new norm.  They still have no idea what to do to get the mortgage industry running smoothly again and have run into an infinite number of snags along the way. 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 federal 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. CHECK

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. CHECK- I must say they got this system down and are doing a great job- albeit an income generator for the program.

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. This turns out to be very expensive for the loan officer and caused more than some to exit the industry last year.

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. When checking this site, you will be given limited information about the company, the owner and any complaints or fines they might have. It is not very transparent and basically shows approved licenses.

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 still being worked out, although they are implementing the system in less than one month and will become the new industry standard of compensation. As stated, this will be the final reason for hundred more to leave the industry in 2011. The average loan officer working for a broker or banker will make less money, the smaller shops will have to reduce their compensation even more to compete with banks and the paperwork and fees will create more work to simply comply. With mortgage programs tighter, mortgage insurance harder to get, interest rates rising and no rebound in the market in sight, too many mortgage loan officers that are top notch will leave out of simple frustration with compliance.

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.

 85% of the mortgage industry professionals have since existed the industry. If there is a last man standing, how will he be able to handle the work load!

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!