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the mortgage industry today, we need to pull together and fight back by staying in the game and not giving in,” said Rozo. PRMG applauds those entities and organizations that continue to provide education and support to the mortgage brokers along with the best possible loan programs, service and technology to ensure they can succeed in today’s mortgage environment. For more information, visit www.prmg.net.
Tick-Tock Goes the SAFE Clock We are here at the mid-year mark of 2010 and the SAFE Act deadlines are flying by. At the end of July, 39 states will require new originators to complete the licensure process before they can originate a mortgage loan. For existing originators in these states, deadlines are looming and the clock is ticking. Seriously, if you have not already completed your SAFE Act requirements, it’s time to establish a strategy to get it done. I’ve witnessed many people fail because of haphazard attempts at education and testing. I’ve also learned the most effective approaches for success the first time through. The essential steps are education and testing, which must be completed before you can apply for your state mortgage loan originator’s (MLO) license.
Education
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The SAFE Act requires every originator to complete a minimum of 20 hours of Nationwide Mortgage Licensing System (NMLS)-approved education. Now each state requires an originator’s license and national pre-licensing education. To date, 19 states have also chosen to require some amount of state-specific education. Begin by going to the NMLS Web site, www.stateregulatoryregistry.org, and look for the “MLO SAFE Requirements Compliance Chart.” Check your individual state’s education deadlines and whether your state is participating in certification. Thirty-five states are certifying past education for existing MLOs. In these states, you may have already fulfilled the pre-licensing education requirement. Step one is to determine how much, if any, pre-licensing education you must complete and establish your deadline for completion.
JULY 2010 IDAHO
MORTGAGE PROFESSIONAL MAGAZINE
NationalMortgageProfessional.com
Testing The state and national tests are a source of high anxiety. The bar has been raised substantially and these tests are designed to be challenging. Every new and existing MLO must take the national test component with no exceptions. However, 17 states are certifying previous testing, and in these states, you may be exempted from taking the state-specific test component. As of June 1, 2010, more than 127,000 state and national tests have been completed with surprising results. Currently, 71 percent are passing the national test on the first attempt, however, 56 percent of people who failed the first time are failing again on their second attempt. Average first-time pass rates on state tests are 79 percent with 40 percent of retakes failing on the second attempt. To date, there have been more than 42,000 failed attempts. It is clear not all originators are properly prepared. Step two is to determine if you need to take both tests. Establish your state deadlines and commit yourself to proper test preparation.
SAFE Smart advice for the professional era This is the era of the professional MLO. Your state MLO license is an asset that differentiates you in the marketplace. My SAFE Smart advice is to get started by shopping for the highest quality education and find the best test preparation tools possible, and then commit yourself to study. With deadlines approaching and 30 days of waiting between retakes, there is no time for failure. Tick-tock goes the SAFE clock. Paul Donohue, CRMS is a 23-year industry professional and founder of Abacus Mortgage Training and Education. Paul served on two NMLS working groups, establishing the new national education protocols. Go to AbacusMortgageTraining.com to find out more about your obligations for testing, education and licensure, or call (888) 341-7767.
HUD announces new strategic plan U.S. Department of Housing & Urban Development (HUD) Secretary Shaun Donovan has unveiled the agency’s Strategic Plan, which will serve as the agency’s roadmap toward accomplishing its mission to “create strong, sustainable, inclusive communities and affordable homes for all.” The Plan will guide the agency through fiscal years 2010-2015. Through the Strategic Plan’s five specific goals, HUD will: Strengthen the housing market to bolster the economy and protect consumers. Meet the need for quality affordable rental homes. Utilize housing as a platform for improving quality of life. Build inclusive and sustainable communities free from discrimination. Transform the way HUD does business. “This Strategic Plan isn’t just a paper exercise to produce a set of marching orders, but a real attempt to express what we want our agency, our homes and our neighborhoods to look like in the years to come,” said Shaun Donovan during his address to all HUD staff nationwide. “The plan sets out clear goals and defines success as we take HUD to its 50th anniversary in 2015.” For more information, visit www.hud.gov.
MBA study looks at risk management practices that contributed to housing crisis Multiple factors, including poor data, incomplete performance metrics, and, shortterm focus and unrealistic optimism among senior business managers contributed to the collapse in the U.S. housing and mortgage markets, according to a study, “Anatomy of Risk Management Practices in the Mortgage Industry,” released by the Mortgage Bankers Association (MBA). The study, conducted by Professor Cliff Rossi of the University of Maryland and sponsored by the MBA’s Research Institute for Housing America (RIHA), analyzes the risk management processes employed by mortgage lenders leading
up to the housing crisis and discusses lessons learned for future risk managers. “As home prices increased, lenders were pressured to offer innovative products that could help borrowers afford a home. The resulting increase and expansion of risk layering and change in borrower behavior, left risk managers unable to offer reliable risk estimates,” said Professor Rossi. “According to some empirical analysis, when market conditions changed, mortgage performance models proved unstable, with loans originated in 2006 defaulting at four times the rate of what a model prior to 2004 would have predicted. Moving forward, it will be essential for the industry to develop early warning measures of the level of risk in new originations and less reliance on imprecise historical performance of new loan products. In addition to the limits in information available to risk managers, corporate culture and cognitive biases also strongly influenced decision-making during the boom. Of particular influence, was the decline in senior business management’s loss aversion due to the lengthy period of strong home prices and low defaults, which led to relaxed underwriting and high levels of risk layering.” Michael Fratantoni, MBA’s vice president of research and economics, said, “Today’s mortgage industry is operating under vastly different guidelines than just a few years ago and the survivors in the industry today are clearly the companies that did things right. However, it is imperative that we look back and examine the factors that led to the problems that fed the financial crisis. There are a range of views regarding the causes of the crisis. We asked Professor Rossi, given his extensive academic and industry experience, to offer us his views on what happened, and what the industry can do going forward to prevent such misjudgments in the future. There is room for debate on how best to proceed, but certainly building a stronger risk management framework around the mortgage industry will be critical.” For more information, visit www.housingamerica.org.
Financial Fraud Enforcement Task Force launches largest mortgage fraud roundup United States Attorney General Eric Holder, Federal Bureau of Investigations (FBI) Director Robert S. Mueller III, U.S. Department of Housing & Urban Development (HUD) Inspector General (HUD-OIG) Kenneth M. Donohue, and continued on page 10