In Bob Tedeschi’s Ethics Standards for Brokers, the National Association of Mortgage Brokers is attempting to respond to the backlash against the industry as a result of the recent mortgage and credit market problems.
Mortgage brokers, who have borne much of the blame in recent months for the subprime mortgage crisis, are now trying reassure borrowers that they are worthy of trust.
There are good mortgage brokers and bad mortgage brokers, not unlike any profession, including appraisers, real estate brokers and real estate attorneys. Their industry is under seige and to its credit (no pun intended), is trying to do something about it.
But self-regulation doesn’t work, and this “seal” doesn’t address the problem. The standards now implemented should already be the very basic elements of membership in their organization.
That benchmark will take the form of the brokers’ association’s Lending Integrity Seal of Approval, represented by the image of a house with a check mark superimposed on it, and the words “lending integrity” below.
I suspect this program is being done to head off regulatory controls that are appearing on the horizon.
You have to ask yourself this question: Will this “Integrity Seal” program help? It won’t hurt, but the main problem is not being addressed by the program.
The mortgage broker is paid a fee to bring business to the lender, but they also interpret and determine the experts and resources that are used to determine the quality of credit and collateral. I would argue that appraisers selected by these firms tend to be those that are willing to “work” with mortgage brokers. This arrangement is flawed without adequate checks and balances. The consumer is wary of the entire mortgage process.
A mortgage broker who was quoted in the article about the seal said:
“If it would distinguish my firm from others, it’d be worth it,” he said. “Borrowers don’t know a good mortgage broker from a bad one.”
Perhaps “bad” is a definition that needs explaining to the consumer.