Too Many Originators Don’t Meet Basic Education, Testing Standards – HousingWire 12/10/14

Association wants Cordray to crack down on independent originators


December 10, 2014 

by Trey Garrison




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The Community Home Lenders Association sent a letter on Wednesday to Consumer Financial Protection Bureau Director Richard Cordray urging the CFPB to use its authority to impose stronger testing and continuing education standards on the industry.

They want the CFPB to require all originators to pass the SAFE Act test, to undergo an independent background check prior to working with consumers, and to require them to complete eight hours of continuing education each year.

Currently, these requirements apply to all nonbank mortgage originators, but not to individuals working at depository institutions. The letter also asked the CFPB to explore the cost and impact of licensing bank mortgage originators.

The letter states that “We believe that it is important — both for the integrity of the profession of mortgage originators and for the consumers that they serve — to have high uniform standards that apply to all mortgage originators, regardless of whom they work for…”

The CHLA letter points out that there are 1,415 registered mortgage originators working at banks and other depository institutions that failed the basic SAFE Act mortgage competency test — and that the consumers they do business with don’t even know they failed the test.

The letter asks the basic question: How can these individuals who failed the test meet the statutory standard of being “qualified”?

The CHLA letter also points out that an extrapolation of certain SAFE Act pass/fail rates would result in a range of between 36,000 and 120,000 registered bank mortgage originators that might fail the SAFE Act test if forced to take it.

The letter also points out the inconsistency of requiring individuals at banks that sell securities or insurance to be licensed, tested and subject to continuing education — while exempting individuals who do mortgage origination from these basic requirements. The letter also points out that most all individuals involved in real estate and mortgage transitions — including real estate brokers, appraisers, home inspectors, and nonbank mortgage originators — are subject to licensing, testing and continuing education, making this de facto exemption for banks almost unique.

The CHLA letter concludes: “At a minimum, bank and other depository institution mortgage originators should be required to pass the SAFE Act mortgage competency test and an independent background check prior to doing business with a consumer, and further to complete eight hours of annual continuing education commensurate with the SAFE Act.”


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