Agents as loan originators has people talking. Is it greed or can one-stop agents really provide better service to consumers?

In the recently published Realty Times' story "Certifying Realtors To Originate Loans," The National Association of Mortgage Counselors (NAMC) is planning one-day seminars to certify agents to originate loans through a participating lender, L &G Mortgagebanc.

Agents serving as loan originators can offer a one-stop shop for consumers, something consumers say they want, according to John Tuccillo, one of the founders of the NAMC. And, the idea could be an attractive way to keep banks out of real estate by putting agents into loan originations with banks who stay on the other side of the line. Others were concerned that originating loans isn't enough to keep banks out of real estate.

This has Realtor Shari A. Dzubak worried.

"One-stop shops are putting the banks in real estate," she warns. "Careful, the fox is getting into the hen house."

She explains, "Realtors need to be mindful that doing it all does not make for a better Realtor. It is preparing you for being the bank's employee. We represent our clients best interests by negotiating contracts and being the source of referring information to our customers and clients. The conflict of originating loans and representing our clients best interest should be obvious. We have no business telling ourselves, much less the public, that we can efficiently do it all. We are professional advocates for the public. Our purpose...to assist the public in procuring the American Dream, homeownership. Let's not muck it up with self serving practices that will in the long run be the demise of our profession, turning that dream into a nightmare."

Realtor Rod Osbeck wonders, "You say this could keep banks out of real estate, but wouldn't this make them say instead that we want our cake and eat it, too? Isn't it hypocritical to try to keep them out of real estate while we go into lending?"

Could be. According to Wells Fargo, as told to Realty Times several years ago, Realtor referrals make up as much as 70 percent of the lender's mortgage loan originations. It would stand to reason that a company receiving that much in referrals from Realtors would be reluctant to engage the Realtor on the unfamiliar turf of selling homes. It also gives an edge to brokers who want to offer guaranteed loan packages through their brokerages. With their own agents originating the loans, how can they lose?

It's possible that brokers could lose, suggests an industry consultant. "The current dilemma of big brokers is how to hold the profitability line," says the consultant, who wishes to remain anonymous. "When they opened up sharing commissions, the agent ended up holding eighty percent. If they start sharing the core service revenues, it will end up in the same way. Certainly the investor-owned units cannot sustain a return on investment with such a model."

A mortgage professional who also wishes to remain anonymous says, "I have been in the real estate and mortgage lending industries for more than twenty-five years and watched as many variations of the theme of your article have been tried and tested over that time. As you are well aware, none have worked to date.

"I must admit to being unable to withhold a slight giggle when reading that anyone would believe that 'a full-day course that consists of seven modules including regulatory compliance, helping clients choose the most appropriate mortgage loan product and terms, and marketing' could possibly produce a competent loan counselor," he continues.

"Assuming all of that could actually be covered in a one day session, and even with today’s technological advantages, it is unlikely that one day’s training would even be sufficient to competently tackle the numerous aspects of automated underwriting. It is also unlikely that a loan professional could attain a level of competence with which borrowers could feel confident without several weeks of training and education, and at least six months of experience.

"Even though it seems everyone looking for a job or a job change becomes a “loan officer” during periods of high refinance volume, the various nuances in secondary market acceptability, income and asset analysis, underwriting guidelines, a veritable plethora of available loan products, constantly changing requirements, and the need for ongoing education and updates ultimately (and usually permanently) separate the knowledgeable from the dabblers," says the mortgage loan officer."

Published: June 18, 2004

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