SAFE Act: Lack of Traditional Mortgage Experience Could Hurt Reverse Lenders

While many reverse mortgage lenders have had success hiring loan officers with no “forward” mortgage lending experience, several people tell RMD that those with little traditional mortgage experience will have a hard time passing the national SAFE Act exam.

Under the SAFE Act, all loan originators must be registered with the Nationwide Mortgage Licensing System & Registry (NMLS) and have 20 hours of pre-licensing education credits as well as 8 hours of continuing education annually thereafter.

Over 10,000 originators have already taken the National Test Component and the results haven’t been good.  According to data from the Conference of State Bank Supervisors, 3 out of every 10 loan originators who have taken the national exam required under the SAFE Act have failed.

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RMD spoke with several originators who have already taken the test and each is worried that employees who only have reverse mortgage experience won’t pass.

"The national exam includes questions a reverse mortgage originator without  traditional experience wouldn’t typically know," said Jack Belles, President of Reverse Mortgages of New England.  He was the first person in his office to take the exam and while passing, he is stressing to his employees the importance of studying.

Bancroft, EVP of Security One Lending agrees, telling RMD that “It’s one of the most difficult tests I’ve taken in the mortgage industry and I think people will fail because they’re taking it too lightly.”

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  • If anyone who expected the exam to be different does not understand the nature of the industry. For the purpose of licensing, there is no legal difference between a licensee who does reverse mortgages only and any other originator in the broader mortgage industry.

    The same problem has existed for reverse mortgage originators in Oregon for years. It is an exam designed to test the knowledge of forward mortgage originators, period. Reverse mortgage originators are not even an after thought.

    Our sector of the industry is but a drop in Lake Michigan compared to the mortgage industry as a whole. The main problems in the economy and the mortgage industry as a whole is almost exclusively on the forward side. So if the concern is bringing up the standard among originators, the problem is concentrated in the forward mortgage sector, and all licensees can originate almost any kind of mortgage, it is only right that there is absolutley no emphasis whatsoever on reverse mortgages. Originators should be prepared for a somewhat difficult exam designed exclusively for forward mortgage originators.

    All lenders should be prepared to experience a much higher failure rate from reverse mortgage originators, especially from those who have only originated reverse mortgages. Reverse mortgage lenders should be aware of this potential problem and helping their reverse mortgage originators find the help they will need.

  • I have read the critic and agree with his comment, I would like to add that they could choose to do licensing like other profesions and certify by testing for specific fileds.

    Insurance agents get licensed for specific areas (life, health, property, annuites, etc…)

    Securites brokers get licensed for specific areas (general, options, mutual funds only, fin op, etc…)

    Even attorney's get certified in specfic area of practice (family, corporate, estate, divorce, etc…)

    So why should this licensing be a one size fits all? Wouldn't a client be better servevd if there was testing for that area that the client was interested in? Wouldn't that help to give better service in all areas?

  • Until Bank employee FHA HECM loan originators have to be licensed as well, why would any loan originator work for a mortgage broker.? Damn,
    I hate double standards: Where is George Orwell we need him most–“Some
    animals are more equal than others.”

  • It makes absolutely no sense to exempt bank employees from mortgage licensing requirements. Bank employees are required to be licensed in other areas, like securities for example. Why wouldn't mortgages be the same, especially after what we just experienced?

    • It is like the old saying went about baseball: “Put on pinstripes and suddenly you are a great baseball player.” Get on the stage coach or ride the blimp with Snoopy and you will not need a mortgage license. I guess people like you and me just plain don't get it.

      • I rode the RM stage coach 4 years, got off 4 years ago now. Employees there are no better suited for this type of work, or more knowledgeable, than others. Actually, being a broker requires a higher level of knowledge and skill since there is no name to hide behind.

      • Lance,

        I could not agree with you more. But please do not say that where Ken Kanady can hear you.

        In 2004 I first “learned” about proprietary reverse mortgages from a stage coach reverse mortgage sales manager and walked away understanding less about HECMs and proprietary reverse mortgages as a result. It is interesting how far “wearing pinstripes” (or in this case, riding on board of a stage coach) can take a person.

      • There are of course many fine people there, Ken being one of them! I did enjoy my time there.

      • Some of the best of the industry are at the national banks but that should not exempt them from the exam.

  • I believe that a RM originator has to have a broad area of expertise including real estate and Title. Licensees in Real Estate and Title can't pass their respective tests and continuing ed without knowing a considerable amount about mortgage. The notion that RM originators are a special breed is ridiculous. I get plenty of questions from clients about forward mortgages, title issues and real estate.

    It is not correct that licensees in Real Estate and Title take exams focused exclusively on their area of specialization. In my state a Realtor who specializes in Commercial still has to pass the equal housing part of the exam. Same is true with title insurance agents where 25% of the exam is on insurance in general.

    • rmguy,

      You boldly declare: “In my state a Realtor who specializes in Commercial still has to pass the equal housing part of the exam.” Since it is this kind of misunderstanding and misinformation that pervades your comment, let’s exam three basic elements of that statement.

      First, are there very many Realtors in your state who specialize in commercial? Second, is there a single state which requires that any single section of the real estate exam be passed as a separate section? And third, why wouldn’t they be tested on this area of law?

      Not all real estate licensees are Realtors but all Realtors are real estate licensees. All a Realtor is a licensed real estates sales agent or broker who is a member of the National Association of Realtors, a trade organization primarily focused on non-commercial residential sales. For example, I am an active real estate broker but a former Realtor.

      There is a misnomer that just because an exam includes sections like equal
      housing laws, a licensee passed that section of the exam. Either one passes the exam as a whole or fails If there is any state with a different procedure, please advise. Many peers have commented to me over the years: “I know I didn't get a single question on that issue right, but I passed” (whatever “that section” was for them).

      Finally, a vast number of commercial real estate agents sell or have been involved in the selling of mult-family properties such as apartment buildings and trailer parks. Equal housing issues are of great importance in those setting.

  • The exam should be difficult so that only serious, career-minded professionals who actually possess the required knowledge will be able to originate mortgage loans. If this results in a lower number of players, that's better for each of us who remain.

    I also agree with the sentiments expressed above that bank-employed originators must pass the exam and be licensed as well (under the SAFE Act, only registration is required of such persons).

    • HECM_Dude,

      No one is asking for an easy exam. What is needed are two separate exams of equal difficulty. If one passes the reverse mortgage exam, then that person should be licensed to originate reverse mortgages. If one passes the forward exam, then that person should be allowed to originated forward mortgages. If one passes both, then why shouldn't that person be allowed to originate both?

      • What is hard about the exam is all the government regulations that conflict with each other. Having just finished the required 20 hours of continuing education I can assure you that is not an easy task. Many of the new regulations are requiring that we as loan officers take each and every applicant as an equal. We pay up to $20.00 to pull each credit report. The guidelines are now requiring a minimum credit score of 640 which means that anyone under that score can't get a mortgage.
        This licensing requires a State test at $90.00, fingerprinting, back ground check (20 Years). Now there is a Federal test which is $90.00 and requiring that we be fingerprinted again. (Why? our fingerprints have not changed. The right hand does not know what the left hand is doing with the government involvement. Our business is way down as values,
        jobs & loan programs can't help a person refinance to a lower rate. So we are not making any money and forced to pay for testing that is redundant. All we are doing is arranging a financing arrangement so the normal person out there can pay for their mortgage. This industry is totally destroyed by the government involvement. The real problem was and still is Wall Street and the tarp money that helps the banks double dip. Now for 2010 they have mandated a new Good Faith Estimate that iso confusing that we can't even understand it. There is no place for a signature and the fee's can not be changed after intitial disclosure. Some of these fee's are lenders policy and title fee's which we do not know until we have the title work back from the sellers title company. All the fee's are grouped together under the origination which are not all the buyers costs. Most everyone could have been helped if they could refinance their mortgage balance for a lower interest rate without having to do an appraisal on current depressed mortgage value. The banks and servicers are stuck with the mortgage anyway. What a big mess!

  • Reverse mortgages constitute such an infinitesimally tiny slice of total mortgage activity it is highly unlikely 50 state regulatory agencies are going to carve out separate licensing for forward and reverse mortgages. If anything, there should be additional testing and licensing for reverse mortgage originators, given the vulnerability of the population they serve.

    • HECM_Dude,

      You are correct that we are a small segment of the mortgage industry. However, there is certainly precedence for a separate examination for such a small group of people.

      In fall 1972 before becoming a CPA, I sat for an examination (“enrolled agent”) given to income tax preparers who wanted the same rights to represent tax clients as those automatically granted by the IRS to CPAs and attorneys. At that time the exam was given once a year over a day and one-half period of time. There were less than 400 people nationally taking it on the two days I sat for it.

      The U.S. Department of Treasury (under which the IRS falls) had been granting this status since the 1880s but at the time I was granted enrollment in the beginning of 1973, less than 11,100 had ever been granted this status. In the mid 70’s, California required tax preparers to become licensed exempting CPAs, attorneys, and “enrolled agents.” The first year that the California licensing law took effect, the IRS was overwhelmed with examination applications.

      Compared to the IRS enrollment exam in 1972, the potential number of reverse mortgage originators taking a separate reverse mortgage test looks immense.

  • If there were ever a case for age discrimination, the FHA HECM field stands out. Youngsters (anyone under 50) just have no idea the pressures on Seniors, striving to remain in their own homes while staying alive in life's last years. I know this many will disagree but this is truly one area where empathy is the foundation of one's work. Counseling, applications, the numbers, GFE, and God knows what else in the details, the real bottom line is does one really understand the Senior's situation and how they arrived at such a state in life. In my opinion, this position really is not about money, it's about real people, many of whom are hurting in many ways.

  • Dear Critic, My point, and not very well made, is that all the exams in the world will never take the place of an inate understanding and appreciation of a Seniors needs ( social, health, and financial ). Generally, the older one is the greater one's life experiences which I believe should be the foundation for working with Seniors. Even I, at the age of 71, am at a loss sometimes to understand the conditions I find some of my Fellow Senior Clients in. I'm sure some youngers folks just think we Seniors were just born, and remained, stupid. Forgive my ill-placed remarks, please. I really shouldn't even be blogging amongst you extremely well educated, very intelligent, and talented writers.

    • I am your junior but your point is well taken. I also believe if someone is going to work with seniors, their first responsibility should be to learn what it is they are selling and such “knowledge” should be proved by testing.

  • but your remark to Mr. Nelson is just plain mean spirited!”

    Disagree. If you saw some of Nelson's older posts to Critic and others, you would think Critic's was an air kiss. Also, he drinks too many espressos (and has confessed it).

  • I have been working for the same company for 8 years. I have always been customer service oriented. I am always upfront and honest with the customers. We have very strict guidelines, such as income verification, indentity verification, we double check everything that we do. When I was hired for this job our main focus was personal loans, we also close Mortgage loan, but just re-finance and 2nd mortgages. We do not do purchase loans. The exam I am about to take has nothing to do with what I do at work. There may be a very small portion that pertains to our business, but the majority is not related, I do not make alot of money and I do not see why I should have to know all this other Mortgage related stuff, since I will not use it in the job field I am in.

  • What is hard about the exam is all the government regulations that conflict with each other. Having just finished the required 20 hours of continuing education I can assure you that is not an easy task. Many of the new regulations are requiring that we as loan officers take each and every applicant as an equal. We pay up to $20.00 to pull each credit report. The guidelines are now requiring a minimum credit score of 640 which means that anyone under that score can’t get a mortgage. rnThis licensing requires a State test at $90.00, fingerprinting, back ground check (20 Years). Now there is a Federal test which is $90.00 and requiring that we be fingerprinted again. (Why? our fingerprints have not changed. The right hand does not know what the left hand is doing with the government involvement. Our business is way down as values, rnjobs & loan programs can’t help a person refinance to a lower rate. So we are not making any money and forced to pay for testing that is redundant. All we are doing is arranging a financing arrangement so the normal person out there can pay for their mortgage. This industry is totally destroyed by the government involvement. The real problem was and still is Wall Street and the tarp money that helps the banks double dip. Now for 2010 they have mandated a new Good Faith Estimate that iso confusing that we can’t even understand it. There is no place for a signature and the fee’s can not be changed after intitial disclosure. Some of these fee’s are lenders policy and title fee’s which we do not know until we have the title work back from the sellers title company. All the fee’s are grouped together under the origination which are not all the buyers costs. Most everyone could have been helped if they could refinance their mortgage balance for a lower interest rate without having to do an appraisal on current depressed mortgage value. The banks and servicers are stuck with the mortgage anyway. What a big mess!

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