May 10th, 2012 3:43 PM by Gregg Mower
The Mortgage industry has long been a confusing industry not just for a customer trying to get a home loan but it has been a bit esoteric in the way it operates. Top producing Loan Officer have always been reluctant to share their secrets. Interest rates have long since been an area where most people in the industry still are not sure how they are derived. The industry has tried for some time to create a disclosure that average person on the street could understand. Now there is the government imposing more rules and regulations on the industry and further confusing not only those of us who are and have been in the business for years. With the onset of the Nation Mortgage Licensing System (NMLS) every loan originator in the country must pass a test to enter this trade, and in some case must also hold a Real Estate license. We have seen a dramatic decline in loan originators over the last 5 years due to the road blocks that have been put in place by the government.
What is the answer? More regulations that not only affect the industry it also affects the consumer in their ability to get a home loan in a timely manner. With less loan originators you get less people doing more work, which is good for those that have the work but if you desire to reach an originator it might be a little tough to get a hold them as they are doing more work. To compound things times are slow and the demand for loans is low right now, what happens when real estate heats up again? Will it take 3 to 6 months to get a home loan? That could be detrimental to an already fragile industry.
If you want to start a mortgage company in today’s world you will need first to hold a Real Estate license or a Consumer finance lender license, and that will require going through the hoops to get those designations. Once you have a Department of Real Estate Broker license, for example, you will then need a name to operate under, you will have choices to do a DBA (doing business as) by paying a fiee to the county and publishing your name you desire for 30 days and after that you wait another 30 days to get the actual name to use. Or you can incorporate, at which time you must chose what type of corporation you want to be (i.e. “S” corp, “C” corp, or LLC) and pay the applicable fees for incorporating. Then somewhere along the way you had better take and pass the NMLS test and pay the fees, a process that will take about 60 days if you are fast. After you have these items you then must get your company or your sole proprietorship a NMLS number then the regulator has to sign off on it another 30-60 days. Oh did a forget the fees for each step, and if you don’t feel comfortable doing all of that yourself you will pay someone to do it for you, for a fee. Once you have you and your company fully licensed then you will have to find a company to sponsor you as a mortgage broker and if you have no experience there will be a limited amount of wholesale lenders that you can do business with.
So if you think markets can and will always equalize like we are taught in our basic economic class, you might have forgotten the barriers of entry argument. So where does that leave the consumer? Well basically with less choices and higher prices which is basic economics of demand and supply. People may believe in regulation and I do but to a point and the argument will always be that the good businesses have to pay for the poor ones that came before them. If there is an answer to this conundrum I would love to hear it as always give your commets.