Brett Shively is executive vice president of financial services for OnCourse Learning, where he oversees the company’s financial services compliance and regulatory training products and services.
Here, Brett discusses the importance of ongoing education for lenders and offers advice to consumers about navigating the loan process.
Tell us about OnCourse Learning. What types of financial services training do you offer?
We are leaders in regulatory and governance, risk, and compliance education within the financial services market. We provide licensure and general compliance training to mortgage lenders, banks, credit unions, non-bank financial services, gaming and insurance companies.
We have a unique blend of experience and expertise with first-to-market content and state- and federal-approved courses. Our learning solutions provide organizations with customizable content, robust reporting, student dashboards and communications. We offer training in many different formats including live classes, webinars or online so students and employees can remain compliant and have the tools and training to be successful in the industry.
Where have you found are the biggest knowledge gaps among mortgage lenders?
This varies by lender and experience level. However, the largest knowledge gaps exist when new loan originators attempt to apply their required training for licensure to an ever-changing regulatory environment. This was most recently reflected in changes to the Qualified Mortgage Rule and regulations surrounding adjustable rate mortgages. The complex issues surrounding implementation of the Consumer Financial Protection Bureau’s TRID rule are also a big concern in the industry.
The test the NMLS requires, as with all licensure examinations, is meant to determine if a candidate is minimally qualified to practice in the industry.
Understanding how to apply that foundation of knowledge to real-world scenarios they will face every day is what lenders are missing as they enter the workforce.
Why is it so important that those in the mortgage industry receive ongoing training?
Since the passage of the SAFE Act in 2008 that led to the establishment of the Consumer Financial Protection Bureau, regulatory requirements placed on those conducting financial business with the public have increased tremendously.
The Dodd-Frank Act spans some 2,300 pages, and the CFPB has levied fines in excess of $5 billion since its inception.
It is unrealistic to believe any one person could be expected to maintain pace with that oversight without relevant, ongoing training.
For those shopping for loans, how can they ensure that their lenders are educated and knowledgeable?
First of all, consumers should ask questions of their lenders.
Potential borrowers can ensure lenders are educated and, more importantly, licensed by verifying their status with the NMLS.
All independent loan originators are required to register with the NMLS, submit to a criminal background check, obtain a minimum education requirement, pass an examination, and keep up with continuing education that covers any post-licensure regulatory changes.
All of this information is made available via the NMLS Consumer Access website. A consumer can utilize this information to ensure loan originators are compliant.
What are the risks to borrowers when mortgage lenders are not up-to-date on compliance?
The largest investment most of us will ever make is buying a home. When an originator is not compliant, it can potentially put that investment at risk. Most consumers have little to no understanding of the mortgage products available in the marketplace today.
Borrowers rely heavily on loan originators for a recommendation, which is based on a solid understanding of federal and state laws. Borrowers also expect to be provided with the best products and services based on their current and future financial standing and needs.
Requirements exist to provide disclosures and thorough vetting of the consumer’s ability to repay the loan. However, the consumer still places a heavy reliance on the knowledge, skill and ethical excellence of the loan originator, underwriter, appraiser and all other licensed professionals involved in the loan transaction.
From where you sit, what are the most common mistakes or oversights first-time home buyers make when shopping for loans?
It is imperative that first-time buyers understand they are making a significant long-term commitment.
One issue that caused the housing crisis, and led to many of today’s Ability to Repay regulations, resulted from consumers attempting to purchase – and being provided a means to purchase – a home they could not afford.
First-time home buyers sometimes can be so focused on making a desired purchase that they fail to consider the obligations of a lending transaction and the duration of these obligations. The temptation to buy can lead some to try and improve their chances of loan approval by providing inaccurate or misleading information regarding income, liabilities, revolving debt and employment on applications. Few realize that by exaggerating their eligibility for credit they are potentially jeopardizing long-term financial success and possibly violating state or federal laws.
These potential buyers are heavily reliant on an ethically practicing team of professionals to guide them through the process.
What types of questions should first-time home buyers be asking lenders during the loan application process?
Potential buyers should ask any and all questions that come to mind during the process.
Home buyers should ask how their long-term and short-term financial plans may impact the choice of loan products and the amount of house they can afford.
They should ask detailed questions about their personal financial history and credit score, the impact the score has on the application process, the appraisal process and its impact, and finally, any financial details related to the loan, such as interest rate, prepayment penalties and potential changes to financial terms.
Buyers must attempt to gain a detailed understanding of the interest, principal, escrow and other components of the payments they will be making monthly.
How do you train lenders on educating their clients? What should they be discussing with lendees?
Lenders should strongly encourage clients to read all the disclosures that they receive during the course of a transaction and ask questions about anything they don’t understand. The new integrated Loan Estimate and Closing Disclosure is one of many disclosures that have been rewritten in plain language to make them user-friendly. But that does not guarantee the consumer will have working knowledge as a result.
Loan originators deal with clients one on one, and they should be trained to explain the purpose of each disclosure and encourage consumers to regard the information provided as critical. Loan originators provide extensive paperwork for a reason, and they should attempt to be certain that the buyer understands them.
What mortgage trends or headlines are you currently following? Why?
Mortgage trends that we are following include:
- Emerging markets for non-prime borrowers: Many Americans are still suffering the effects of the recession and do not qualify for prime mortgages. The financial industry always has been creative when it comes to offering products that comply with current regulations and offer a solution to buyers in need. OnCourse Learning stays abreast of these products to ensure our educational offerings are relevant.
- Interest Rates: One of the most impactful drivers in the mortgage space in terms of loan volume and hiring activity is the trending rate of the 30-year mortgage. We monitor this to predict the needs of our clients to ensure we can quickly and efficiently satisfy their needs and assist them in streamlining compliance activities.
- Pending Regulation and the direction of the CFPB: The Consumer Financial Protection Bureau has been active and shifted focus often. Our job is to stay up to speed on changing regulations and assist our clients with compliance challenges.
Any final pieces of advice for home buyers on navigating the process of finding a reputable lender and navigating the mortgage process?
Buying a home is an exciting time in our lives, but buyers should be mindful of approaching the process wisely.
The CFPB provides online consumer education on mortgage lending, as well as other resources, including a Consumer Complaint Database. Potential borrowers should prepare for meetings with lenders by using these tools to learn what questions to ask and to confirm they are dealing with a lender that is not the subject of an unreasonable number of complaints.
Consumers need to educate themselves, find a lender that is qualified and trustworthy, and navigate the process with their eyes wide open.